Lenovo’s New Revolving Facility May Increase Gross Debt: Lucror

The group’s new $1b revolving credit facility comes as earnings are weak, albeit with some signs of a turnaround, according to a research note.

* The new facility will refinance certain near-term maturities and improve its liquidity profile, says Trung Nguyen, senior credit analyst at Lucror

* “On the other hand, it may increase gross debt, which has been on a downward trend since FY 2015-16”

* NOTE: The PC maker is marketing the 5Y revolver with a L+160 margin. That compares with a L+140 margin on its $1.2b 5Y loan due December

* Lucror is keeping a negative credit bias on Lenovo due to “industry headwinds” and ongoing business transformation.

* Earlier stories:

** Lenovo posts surprise net Loss as mobile business continues to struggle with shrinking revenue

** A $5b goodwill iceberg could sink Lenovo earnings: Gadfly

* NOTE: Spreads on the company’s $500m 3.875% 2022 bond have widened to +183bps from about 180bps before the earnings report, according to Bloomberg-compiled prices; they were sold at +180bps in March 2017

February 14, 2018, 03:54:07 GMT

By Annie Lee; Edited by Neha D'silva and Beth Thomas