Resideo Technologies, Inc. (NYSE:REZI), a wholesale hardware company, announced on Wednesday that its wholly-owned subsidiary, Resideo Funding Inc., has successfully issued $600 million in 6.500% senior notes due in 2032. The offering, which is not registered under the Securities Act, targets qualified institutional buyers and certain non-U.S. persons in accordance with Rule 144A and Regulation S.
The proceeds from the sale of the senior notes were utilized on the same day to repay a significant portion of the company's existing senior secured Term B loans, which were set to mature in 2028. The repayment covered $596.3 million in principal and all accrued and unpaid interest.
The new notes are unsecured senior obligations, backed by guarantees from Resideo Technologies and its domestic subsidiaries that support the company's senior secured credit facilities. Additionally, certain future domestic subsidiaries incurring over $50 million in debt will also serve as guarantors.
Interest on these notes will accrue at an annual rate of 6.500%, with payments made semi-annually starting January 15, 2025. The notes will mature on July 15, 2032, but the issuer reserves the right to redeem them before July 15, 2027, at a price inclusive of a make-whole premium. Post this date, redemption prices are specified in the indenture. Furthermore, up to 40% of the notes can be redeemed before July 15, 2027, using equity offering proceeds at a rate of 106.500% of the principal plus any accrued interest.
The indenture imposes limitations on the company and its restricted subsidiaries, restricting their ability to incur additional non-Guarantor indebtedness, enter into sale and leaseback transactions, and consolidate or merge, among other covenants.
In case of a change of control coupled with a ratings downgrade, note holders have the right to demand the issuer repurchase the notes at 101% of the principal amount, plus accrued interest.
The full details of the indenture and its implications are available in the Exhibit 4.1 of the Form 8-K filed by Resideo Technologies. This SEC filing serves as the source for the information provided in this article.
In other recent news, Resideo Technologies has made several notable business maneuvers. The company launched a $500 million offering of Senior Notes due 2032, aiming to repay part of its existing senior secured Term B loans. This action is part of Resideo's strategy to manage its debt obligations effectively. In terms of earnings, Resideo reported a slight dip in revenue for the first quarter of 2024, with a decrease of 4% compared to the same period in 2023. However, the company achieved gross margin expansion and cost reductions, maintaining its financial outlook for the second quarter and full year.
Resideo also announced the strategic acquisition of Snap One, a move expected to enhance its product offerings and customer reach. This acquisition aligns with Resideo's ongoing transformation and focus on high-margin and high-growth areas. These recent developments, including the launch of the Senior Notes offering, the acquisition of Snap One, and the release of the first quarter earnings, are significant for investors tracking Resideo's performance.
The company's strategy also includes plans to reduce leverage to approximately two times by mid-2025. These actions demonstrate Resideo's commitment to managing its financial health and positioning itself for future growth.
InvestingPro Insights
Resideo Technologies' recent strategic financial maneuvers, including the issue of senior notes and repayment of existing debt, reflect a proactive approach to managing its capital structure. In light of these developments, insights from InvestingPro reveal noteworthy trends in the company's performance and market sentiment. With a market capitalization of $3.22 billion and a forward-looking P/E ratio of 8.76, Resideo appears to be valued attractively relative to its earnings.
InvestingPro Tips highlight the stock's significant return over the last week and strong performance over the past six months, with a price total return of 32.73%. This suggests a robust investor confidence and a potentially favorable outlook for the company. Additionally, Resideo's liquid assets surpassing short-term obligations indicate a solid financial position, which may reassure investors of the company's ability to meet its immediate liabilities.
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