Summary
Medtronic plc (MDT) announced on July 10, 2019, significant debt refinancing activities. The company is purchasing approximately $5.171 billion in aggregate principal amount of various senior notes. This action follows a recent issuance of €5.0 billion in senior notes, with proceeds earmarked for these purchases. Medtronic anticipates these transactions will be leverage neutral, meaning they do not expect a material impact on their overall debt levels. The primary financial impact highlighted is a reduction in expected non-GAAP interest expense. While the first fiscal quarter (ending July 26, 2019) is not expected to show material changes to its previously guided non-GAAP interest expense ($200-$210 million), the company now projects a lower non-GAAP interest expense of $170-$180 million per quarter for the second, third, and fourth quarters of fiscal year 2020 (Q2-Q4 FY20). This pre-tax benefit is expected to be slightly offset by a minor increase in U.S. tax expense.
Key Highlights
- 1Medtronic is undertaking a significant debt refinancing, purchasing $5.171 billion of senior notes.
- 2The refinancing follows a recent issuance of €5.0 billion in senior notes.
- 3The company expects these transactions to be leverage neutral.
- 4Projected non-GAAP interest expense for Q2-Q4 FY20 is reduced to $170-$180 million per quarter.
- 5This reduction in interest expense is expected to be on a pre-tax basis and will be partially offset by a slight increase in U.S. tax expense.
- 6Management is comfortable with the upper end of its FY2020 EPS guidance ($5.44-$5.50) due to these expected financial benefits.
- 7Medtronic plans to update its EPS guidance on August 20, 2019, when it releases its Q1 FY20 earnings.