Intel Corporation (NASDAQ:INTC) plans to repurchase $6 billion of its common stock by selling bonds. ValueWalk reported the initial news on Tuesday, and this morning it has been officially confirmed, and we now know further details. The company said it will work on those bonds with J.P. Morgan Securities LLC and Merrill Lynch, Pierce, and Fenner & Smith Incorporated. This bond offering is the second one like it since 2009, with the previous one being offered in September, 2011, and raising $5 billion.
Under the terms of the current deal, half of the funds will mature mid-December in 2017. They’ll carry a 1.35 percent annual interest rate. Then $1.5 billion will mature mid-December in 2022 and have an annual interest rate of 2.7 percent. $750 million will mature in 2032 at an annual interest rate of 4 percent and the other $750 million will mature in 2042 and have an annual interest rate of 4.25 percent.
All of Intel Corporation (NASDAQ:INTC)’s notes were offered at more than 99 percent of par, with the exact amounts varying according to which year they will mature in. The offer will likely close Dec. 11.
Meanwhile, Intel Corporation (NASDAQ:INTC) shares have been downgraded by Raymond James analysts this morning. They have changed their rating to Underperform from Market Perform because they believe that although the last three years the company has seen gross margins between 62 and 65 percent, that will change.
Raymond James believes that the company faces structural issues because demand trends are shifting toward chipsets that are more energy efficienct, like those made by ARM Holdings plc (NASDAQ:ARMH) (LON:ARM), which are also significantly less expensive than Intel’s chips. They also believe that CEO Paul Otellini’s sudden departure announcement is shocking and could be very detrimental to the company.