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Amkor (AMKR) Announces Pricing of $525M Senior Notes Due 2027

Amkor Technology, Inc. AMKR recently announced proposed offering of senior notes aggregating $525 million in a private placement. The notes carry an interest rate of 6.625%, which will be payable semi-annually on Mar 15 and Sep 15 of each year. The notes are scheduled to mature in 2027.

The company stated that the transaction proceeds from this offering are expected to be around $519 million. This amount, together with cash on hand, shall be used to redeem $525 million of its outstanding senior notes due 2022, and related fees and expenses.

Cash Position

At the end of fourth-quarter 2018, its cash and restricted cash totaled $684.2 million, up from $382.3 million in the last reported quarter. The company’s long-term debt in the quarter was $1.2 billion.

Free cash flow was $120 million compared with negative $100 million in the third quarter.

We believe that the company has a strong balance sheet, which will help it capitalize on investment opportunities and pursue strategic acquisitions, further improving growth prospects. In our view, the senior notes’ offering will bring down the company’s cost of capital, in turn strengthening its balance sheet and supporting growth.

These notes should provide financial flexibility as well as propel long-term growth.

Bottom Line

Amkor has a well-diversified product portfolio, which will continue to drive revenues.

The company has been making efforts to channelize its resources in important growth areas like MEMS and sensors business, which focus on mobile and automotive applications. In this regard, Amkor recently added a third MEMS and sensor production line in Korea to attract more business.

The company remains optimistic about automotive business growth. Per market forecast, the automotive market will grow in high-single digits in the coming years. The growth is expected to be driven by increasing electronic content. Given attractive value proposition for automotive customers, the company is poised to benefit going ahead.

Zacks Rank and Stocks to Consider

Amkor currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Expedia Group, Inc. EXPE, AMETEK, Inc. AME and Inphi Corporation IPHI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Expedia, AMETEK and Inphi is projected at 13.4%, 9.6% and 28.4%, respectively.

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