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PayPal Holdings, Inc. (PYPL) recently announced an offering of senior notes aggregating $5 billion. These notes have been issued in four tranches of different amounts, with varying coupon rates and maturities.
The first tranche of $1 billion carries an interest rate of 2.200% and is due 2022, the second tranche of $1.25 billion has an interest rate of 2.400% and is due 2024, the third tranche of $1.25 billion has an interest rate of 2.650% and is due 2026, while the fourth tranche of $1.5 billion has an interest rate of 2.850% and is due 2029.
The closing of the senior notes offering, which is subject to the satisfaction of customary closing norms, is anticipated to be around Sep 26, 2019.
PayPal stated that the transaction proceeds from the offering will be approximately $4.97 billion, before deducting offering expenses.
Notably, the proceeds will be used to repay its existing debt and for general corporate purposes.
PayPal Holdings, Inc. Price and Consensus
PayPal Holdings, Inc. price-consensus-chart | PayPal Holdings, Inc. Quote
Cash Position
At the end of the second quarter, cash equivalents and investments came in at $8.4 billion, up from $7.8 billion at the end of the prior quarter.
The company generated $1.17 billion of cash from operations, up from $1.03 billion in the first quarter. Its free cash flow came in at $1.03 billion during the last reported quarter.
As of Jun 30, 2019, the company’s outstanding 364-day term loan was $2.5 billion,at an average interest rate of 3.5%.
We believe that the company has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving prospects. In our view, the senior notes’ offering will bring down the company’s cost of capital, in turn strengthening the balance sheet and supporting growth.
These notes should provide financial flexibility and propel long-term growth.
Bottom Line
PayPal’s strengthening product portfolio should continue to drive the top line. Its robust product lines such as Venmo and One Touch are key growth drivers. Both the product lines are aiding in growth of the company’s net new active accounts.
PayPal’s persistent efforts toward expansion of the services portfolio are anticipated to be a growth catalyst on the back of increasing demand for online payments and mobile-commerce services on a worldwide basis.
Moreover, the company’s two-sided platform enables it to develop and maintain direct financial relationship with both customers and merchants. The platform connects consumers and merchants facilitating unique end-to-end product experiences to both parties. Merchants are able to keep track of customer behavior and engagement utilizing PayPal’s data.