DirecTV accesses the Wall Street debt market


Direct TVInvestors continue to embrace media company bond issues. DirecTV sold $4 billion of debt to institutional investors via its DirecTV Holdings LLC subsidiary. The cash will be used by the parent company largely for its share buyback program.

The satellite TV company sold $1.25 billion of 2.400% Senior Notes due 2017, $1.5 billion of 3.800% Senior Notes due 2022 and $1.25 billion of 5.150% Senior Notes due 2042. Closing is set for Thursday (3/8), with net proceeds of approximately $3.97 billion heading to the parent company’s coffers.

The debt sale was no surprise. “Recall that DTV stated that it would ‘opportunistically access the debt markets in the near future’ on its Q4 call given that i) the Latin Americas segment has been incorporated into the company’s leverage ratio covenants and ii) total leverage was 1.9x at YE2011 vs. its 2.5x target,” said Wells Fargo Securities analyst Marci Ryvicker in a note to clients. “Consequently it is no surprise to us that DTV tapped the debt markets to raise cash for its share repurchase program (we are expecting about $6B of share repurchases in 2012).”

The bottom line, she said, is that the debt sale was expected and a “non-event,” except that the favorable interest rates are good news. “We have adjusted our model to incorporate the details of the new debt and are raising our 2012 estimated and 2013 estimated EPS to $4.35 and $5.32 from $4.31 and $5.26 respectively; solely due to lower-than-expected interest expense,” Ryvicker wrote.

RBR-TVBR observation: Those are some impressive interest rates. Even the 30-year issue is barely above 5%.