blankmind, RE: But when you’re cash flow positive to the tune of $4+ bill year; easily meeting debt service; why is this too much debt?
Even if cash flow was going to be $4 billion+ over the year (and I don't think that's going to happen), that wouldn't be enough to service debt.
Over the next 18 months, Tyco has about $13 billion in debt coming due, about half their debt outstanding. Before the end of this year, a $1.5 billion bank loan and $1 billion of bonds mature. In February, $2.3 billion of converts can be put back to Tyco. Odds right now are that the holders will do just that. $3.9 billion more in bank debt matures in February, too. Four months later, $750mm more in bonds can be put back to Tyco. Then, in November 2003, yet another $3.6 billion in converts can be put back. It is possible, under certain circumstances, for Tyco to buy back some of the converts by issuing stock instead of paying cash, but that would dilute shareholders pretty bad depending on where the stock price is at the time.
Tyco has big issues with debt, and selling CIT is imperative to Tyco being able to service that debt. |
