Financing Analysis
The total deal will cost approximately $27 million. It appears as though Immucor will borrow $20 million and utilize some of its cash hoard to complete the acquisition of Gamma Biologicals. Immucor should have approximately $10 million in cash remaining to ramp up production of the ABS2000. Of course, they could use the cash to acquire another small company or complimentary technology.
Immucor's commercial loan is priced at LIBOR plus 120 basis points. I found this information regarding LIBOR on the internet.
LIBOR - London InterBank Offered Rate
LIBOR is the rate on dollar-denominated deposits, also know as Eurodollars, traded between banks in London. The index is quoted for one month, three months, six months as well as one-year periods.
LIBOR is the base interest rate paid on deposits between banks in the Eurodollar market. A Eurodollar is a dollar deposited in a bank in a country where the currency is not the dollar. The Eurodollar market has been around for over 40 years and is a major component of the International financial market. London is the center of the Euromarket in terms of volume.
The LIBOR rate quoted in the Wall Street Journal is an average of rate quotes from five major banks. Bank of America, Barclays, Bank of Tokyo, Deutsche Bank and Swiss Bank.
The most common quote for mortgages is the 6-month quote. LIBOR's cost of money is a widely monitored international interest rate indicator. LIBOR is currently being used by both Fannie Mae and Freddie Mac as an index on the loans they purchase.
LIBOR is quoted daily in the Wall Street Journal's Money Rates and compares most closely to the 1-Year Treasury Security index.
The October 1st issue of The Wall Street Journal quoted the following LIBOR rates:
5.375% - One Month
5.312% - Three Months
5.246% - Six Months
5.062% - One Year
Assuming that Immucor's financing is based on the six month LIBOR their interest rate would be 6.446% (5.246 + 120 basis points). This is a very favorable rate. IMHO - it is indicative of Immucor's financial strength as well as their future prospects.
Regards,
Tom
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