NVIDIA Announces Pricing of $2.0 Billion Notes Offering

[HardOCP News]

NVIDIA today announced that it has priced its offering of $2.0 billion of unsecured notes. The notes consist of $1.0 billion of 2.20% notes due 2021 and $1.0 billion of 3.20% notes due 2026. The company anticipates that the offering will close on or around Sept. 16, 2016, subject to customary closing conditions. NVIDIA intends to use the net proceeds of the offering to prefund the repayment of the principal amount of its convertible notes and for general corporate purposes such as dividend payments or share repurchases. Goldman, Sachs & Co., Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC are acting as joint book-running managers for the offering.

 

[Reimu]

Unsecured notes? Nvidia is rather crafty. Basically that's lower than borrowing from the banks based on current prime rate of 3.5%.
Given that we get practically nothing to put things in the bank, Nvidia may convince people to give'em the cash (keep in mind that this is a 10-year note)
If it's unsecured, then all we get is assurance on the part of Nvidia that it'll pay up.

 

[tviceman]

So they're selling these notes to pay out dividends and buy back stock? Why in the world wouldn't they just do that with their own profits and current cash on hand? They've got nearly $5 billion in cash and short term investments. I do not understand this side of finance world.

 

[J Macker]

So they're selling these notes to pay out dividends and buy back stock? Why in the world wouldn't they just do that with their own profits and current cash on hand? They've got nearly $5 billion in cash and short term investments. I do not understand this side of finance world.

I read another article that stated nVidia is shopping for a company to acquire. I have no experience in corporate finance, but there's probably a number of reasons why a company would want to have a healthy amount of cash on hand.

 

[lostinseganet]

I read another article that stated nVidia is shopping for a company to acquire. I have no experience in corporate finance, but there's probably a number of reasons why a company would want to have a healthy amount of cash on hand.

Too look as liquid as possible. Wallstreet like to see companies with liquid assets.

 

[Reimu]

I read another article that stated nVidia is shopping for a company to acquire. I have no experience in corporate finance, but there's probably a number of reasons why a company would want to have a healthy amount of cash on hand.

Too look as liquid as possible. Wallstreet like to see companies with liquid assets.

So they're selling these notes to pay out dividends and buy back stock? Why in the world wouldn't they just do that with their own profits and current cash on hand? They've got nearly $5 billion in cash and short term investments. I do not understand this side of finance world.

Basically, Nvidia is asking for money at a discounted rate to the general population which has little to no string attached (as in if it goes south, you are lining up at the bankruptcy court to get a dib instead of claiming Nvidia assets as collateral). They will hang on to your money for 10 years @ 3.2% per yr or 5 years for 2.2%. That's why I find it a crafty thing for the company to do.

 

[Shintai]

You can see the big difference in lending rates for solid companies and those that are not. 2-3% vs 7-8%. And then there is my mortgage, at -0.36%

 

[raz-0]

So they're selling these notes to pay out dividends and buy back stock? Why in the world wouldn't they just do that with their own profits and current cash on hand? They've got nearly $5 billion in cash and short term investments. I do not understand this side of finance world.

Because that cash is either in the US or not. If it isn't, bringing it in has a HUGE tax liability that makes about 1/3 of it go poof. Even if it's all here already, the below logic applies, just where it is determines the size of the carrot on the end of the stick.

So, you pay dividends and buy back stock out of liquid assets. You now have less liquid assets, and if you didn't drive up your stock enough, someone can start a hostile takeover, and you can't fight it.

You take out a loan, and you keep your liquid assets. You acquire MORE capital to do things with. You get to write off the expense of the loan against earnings, and while you have less profits, you also have less tax liability. So slightly less profits, slightly less tax, buttload more capital on hand to do things with.

Vs blowing your load, being vulnerable to takeover, and having to figure out how you pay dividends next year.

 

[Deleted member 201992]

+1

Because that cash is either in the US or not. If it isn't, bringing it in has a HUGE tax liability that makes about 1/3 of it go poof. Even if it's all here already, the below logic applies, just where it is determines the size of the carrot on the end of the stick.

So, you pay dividends and buy back stock out of liquid assets. You now have less liquid assets, and if you didn't drive up your stock enough, someone can start a hostile takeover, and you can't fight it.

You take out a loan, and you keep your liquid assets. You acquire MORE capital to do things with. You get to write off the expense of the loan against earnings, and while you have less profits, you also have less tax liability. So slightly less profits, slightly less tax, buttload more capital on hand to do things with.

Vs blowing your load, being vulnerable to takeover, and having to figure out how you pay dividends next year.