(GD) General Dynamics Issues $1.5 Billion Debts

Media reports say that defense contractor General Dynamics Corporation (GD) issued $1.5 billion debts with an intention to utilize a part of the proceeds to repay the principal of its $750 million outstanding bonds that are maturing July 15.

The $1.5 billion debts were issued by the company in three tranches of $500 million each. The offer price of the bonds for the first series was $99.84 (per $100.00 principal), and is supposed to yield 1.375% when held till maturity, January 15, 2015. The offer price of the second series was $99.877 (per $100.00 principal) and is estimated to yield 2.25% when held till maturity, July 15, 2016.  The offer price of the third series was $99.835 (per $100.00 principal) to yield 3.875% when held till maturity, July 15, 2021.

General Dynamics’ long-term debts as of April 3, 2011, were $19 million, lower than the debt levels as of December 31, 2010. Accordingly, the debt-to-capital ratio at the end of the first quarter 2011 was 14.8%, improving somewhat from 15.4% at the end of 2010.

Interest expenses in the first quarter 2011 declined 222.7% year over year to $34 million mainly due to lower debt levels from the prior-year quarter. However, with the new debts issued the interest expenses of the company are expected to shoot up.

General Dynamics’ earnings per share of $1.64 during the first quarter exceeded the year-ago result and the Zacks Consensus Estimate. The Zacks Consensus Estimates for second-quarter 2011, fiscal year 2011 and fiscal year 2012 are, respectively, $1.72 per share, $7.13 per share and $7.67 per share.

General Dynamics currently retains a Zacks #2 Rank (short-term Buy rating).  The company competes with The Boeing Company (BA), Lockheed Martin Corporation (LMT) and Textron Inc. (TXT).

Falls Church, Virginia-based General Dynamics, with its units, operates in business aviation, land and expeditionary combat systems, armaments and munitions, shipbuilding and marine systems, and information systems and technologies.

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