8-KOther Events

L3HARRIS TECHNOLOGIES, INC. /DE/ 8-K Report, Corporate Update (Dec 16, 2019)

Filed December 16, 2019For Securities:LHX

Summary

L3Harris Technologies, Inc. (LHX) announced on December 16, 2019, the full redemption of its $400 million principal amount of 2.700% notes due April 2020. The company exercised its option to redeem these notes at a "make-whole" redemption price, resulting in a total payment of approximately $402.8 million, which included accrued interest. This action effectively terminates and cancels the outstanding notes. This redemption is a strategic financial move by L3Harris, likely aimed at optimizing its capital structure, reducing interest expenses, and potentially eliminating a near-term debt obligation. Investors should view this proactively as a sign of strong financial management, freeing up cash flow and simplifying the company's debt profile ahead of the original maturity date.

Key Highlights

  • 1Full redemption of $400 million in 2.700% notes due April 2020.
  • 2Redemption price was approximately $402.8 million, including accrued interest.
  • 3Company exercised a "make-whole" redemption option.
  • 4The redeemed notes have been terminated and cancelled.
  • 5Event date for the redemption was December 15, 2019.

Frequently Asked Questions

L3Harris exercised its "make-whole" redemption option. Companies often do this to take advantage of lower interest rates, optimize their debt structure, reduce future interest expenses, or remove a specific debt instrument that may no longer align with their financial strategy.

The total cost was approximately $402.8 million, which covered the $400 million principal amount plus accrued interest up to the redemption date.

While it represents a significant cash outflow, the redemption also eliminates a future obligation. The company likely has sufficient liquidity or has secured alternative financing to manage this transaction. Investors should consider this as a strategic financial management decision rather than a liquidity crisis.

A 'make-whole' redemption clause allows the issuer to redeem debt early, but requires them to pay the bondholders a predetermined amount that compensates them for the loss of future interest payments. This amount is typically calculated based on the present value of the remaining scheduled payments, plus a premium.