Honeywell (NASDAQ: HON) stock slipped 3.8% through 2:50 p.m. ET Friday after announcing it will pay off about $7.6 billion worth of its dollar- and euro-denominated debt.
Honeywell had earlier offered to repurchase debt through a tender offer. Today’s news concerns the result of that tender offer.
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Specifically, Honeywell said it will redeem a total of $4.67 billion worth of dollar-denominated debt. (Lenders had tendered more than $7.2 billion, but $4.67 billion was the most Honeywell was prepared to pay off.) A further 2.49 billion of debt denominated in euros ($2.9 billion) was further tendered for redemption.
The debt redeemed ranged from 1.75% to 9.06% in terms of the interest it paid, with due dates ranging from as near as 2027 to as late as 2064.
Honeywell announced 10 days ago that it was issuing $16 billion in senior notes, amassing cash as it prepares to spin off its aerospace business. The notes described in that press release pay interest rates ranging from 3.9% through 5.85%, with due dates ranging from as early as 2028 to as late as 2056. Most of the new debt, though, tends to be longer dated, coming due only 10 to 30 years from now.
Paying off debt is generally considered a good thing. Problem is, Honeywell isn’t so much paying off debt as simply rolling it over — and not necessarily, or not entirely, at more attractive interest rates.
Especially in light of recent events (yes, I mean Iran and the Strait of Hormuz), and their potential to push interest rates higher, investors may have preferred that Honeywell hang onto its new cash a bit longer before using it to roll over old debt.
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