Summary
Motorola, Inc. (MSI) announced on December 18, 2002, a significant step in its debt reduction strategy by entering into a forward purchase agreement with Goldman, Sachs & Co. to retire its $825 million of Puttable Reset Securities (PURS) due in 2011. This transaction, expected to close in early February 2003, leverages Motorola's substantial cash reserves, which stood at $6.4 billion at the end of Q3 2002. The early retirement of the PURS, which represented a significant portion of the company's then-current indebtedness, is intended to reduce future interest expenses, particularly following an anticipated interest rate reset on these securities in February 2003. In addition to the PURS retirement, Motorola also disclosed the repurchase of approximately $84 million in face principal of outstanding long-term debt through private transactions during the fourth quarter. These combined debt reduction efforts underscore Motorola's commitment to strengthening its balance sheet and managing its financial obligations proactively. The company expects to incur a net non-operating, pre-tax charge of $98 million in the fourth quarter of 2002 related to these transactions, primarily for terminating Goldman's remarketing rights and a gain from the long-term debt repurchase.
Key Highlights
- 1Motorola to retire $825 million of Puttable Reset Securities (PURS) due 2011 via a forward purchase agreement with Goldman Sachs.
- 2Transaction leverages Motorola's substantial cash position of $6.4 billion as of Q3 2002.
- 3Early retirement of PURS is part of a broader plan to reduce outstanding debt.
- 4Approximately $84 million in face principal of long-term debt was also repurchased in Q4 2002.
- 5Expected to avoid a higher interest expense associated with the upcoming PURS interest rate reset.
- 6Company anticipates a net non-operating, pre-tax charge of $98 million in Q4 2002 for related transactions.
- 7The PURS represented $825 million of Motorola's $1.46 billion in current indebtedness as of Q3 2002.