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Equinix (EQIX) Commences Senior Notes Offering Worth Euro 1B


Equinix Inc. EQIX recently announced the pricing of €1.0 billion aggregate principal amount of senior notes due 2025. Notably, the new offering is higher than the previously announced €750 million aggregate principal amount.

The senior notes carry an annual interest rate of 2.875% which will be payable semi-annually and will mature on Oct 1, 2025. The offering is anticipated to close on Sep 20, 2017.

J.P. Morgan Chase & Co. JPM, Barclays plc BCS and BofA Merrill Lynch are acting as book-running managers for this purpose. Meanwhile, Citigroup Inc. C, RBC Capital Markets, Goldman Sachs & Co., and HSBC are acting as co-managers, along with certain other lenders.

Equinix anticipates that after considering underwriting discounts and commissions, and estimated offering expenses, the above discussed offering will fetch around €988.3 million (or approximately $1,175.8 million) in net proceed.

Equinix intends to use the entire proceed from the aforementioned offerings in two parts. In the first part, the raised amount of €430.6 million (or 512.2 million) will be used for the repayment of its 4.875% senior notes due in 2020. Further, the balanced part of the raised amount will be utilized for general corporate purposes like repayment of existing indebtedness and capital expenditures.

Borrowing costs continue to be low, enabling companies to obtain easy financing. With the U.S. treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing elevated demand. We believe these notes will provide financial flexibility to the company and propel long-term growth as well.

Nonetheless, escalating interest expenses due to increased debt burden may dampen the company’s profitability. It should be noted that at the end of second-quarter 2017, Equinix had cash, cash equivalents and short-term investments of $1.068 billion, while the total debt principal outstanding was $9.37 billion as of Jun 30, 2017.

Currently, Equinix carries a Zacks Rank #3 (Hold).

The company’s shares have gained 30.1% year to date, substantially outperforming the loss of 5.2% incurred by the industry it belongs to.

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