Must be balance sheet spring cleaning week, as Equinix (NASDAQ:EQIX, news, filings) has also now chimed in with a big refinancing plan too. They started off looking to raise a cool billion in senior notes, and wound up pricing a whopping $1.5B of them made up of $500M of 4.875% notes due 2020, and $1B of 5.375% notes due 2023.
Equinix plans to use part of the net proceeds to redeem its existing 8.125% notes due 2018, of which their latest 10K says there are $750M worth - and the savings there will be substantial at these much lower rates. And then there will be $750M left over - which would bring their coffers up to about $1.25B in cash if my math is correct. The extra will go to the usual litany of potential corporate uses, including both other debt moves and strategic transactions.
These days it's almost as if Equinix is starting to have trouble spending the cash they generate operationally, despite all the projects they manage to juggle around the world. This year's guidance has them spending $550-650M, a step down from last year and suggesting at least a few hundred million in free cash flow on the way. The company's planned conversion to a REIT will give them an outlet for all that cash in the form of dividends and such I suppose - nice problem to have any way you slice it.
They were careful to state that they have no current M&A in mind for this money, it appears to be opportunistic. But I think it may quickly burn a hole in somebody's pocket, the only question being what to spend it on. The company has been tightly focused on its current business model for a long time, but perhaps it'll be time to find a way to leverage their way into some new areas.
With the cash Equinix already has and the low rates at which they can probably raise a lot more, they could go after just about anything. But where does a carrier neutral colo company expand its product set to that doesn't end up competing with its customers or making it not the REIT it sees itself becoming?
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