2018 looking good for Lexmark
April 10, 2018
The OEM has got off to a positive start in 2018 and is performing ahead of budget and has recently completed a security agreement with China CITIC Bank on the back of a tough 2017.
Until recently, it was looking as if Lexmark’s fortunes were flailing a little, following its takeover by a Chinese consortium in 2016 and a downturn in fortunes in 2017, which included a 40 percent drop in Lexmark bonds following their earnings report and subsequent bond sale. This prompted Bloomberg to report that Lexmark International Inc.’s holdings had “tanked almost 40 percent”. In addition, the article stated that the OEM’s multimillion dollar selloff of bonds being “accompanied by severe credit ratings cuts that pushed the supplier […] into the bottom end of the scale.”
Back in 2012 Lexmark bonds were also attributed “Junk” status and, according to David Connett, Partner at Connett & Unland “since the spin out of Lexmark from IBM back in 1991 the trials and tribulations of Lexmark have been well known across the corporate printer services and document management sector. The one untapped market is Asia and to be successful in that market you have to have doors opened. The sale of Lexmark to the Chinese investment group gives the company the open door to expand grow.”
The company’s treasurer, Art Richards, talking to Bloomberg said “under its new ownership, Lexmark has been investing in improved efficiency, new hardware, and reduced inventory levels which have put it on “a growth trajectory.” Shan Weijian, chairman of PAG Asia Capital which was part of the group that bought Lexmark said “2018 is performing ahead of budget.”
The company’s 2016 Chinese buyout has been a cause of concern for bondholders, who had the option when Lexmark was taken private to return the notes and get paid back because of the change in control. Bond holders were also chose to accept a fee in return for agreeing to Lexmark discontinuing to report their financials publicly. Bloomberg revealed that according to unnamed people with knowledge of the matter, Lexmark’s “business has declined” and there is “a persistent fear” among bondholders “of being subordinated by other borrowings”.
“The rating agencies are usually three steps behind,” said Shan Weijian, chairman of PAG Asia Capital which was part of the group that bought Lexmark. “2018 is performing ahead of budget.” Company’s treasurer, Art Richards, said that the OEM was working “to ensure the outstanding bonds are treated pari passu with the other credit facilities”, adding that the Kentucky-based company “may also host an investor call following the first-quarter results to clear up any confusion with investors”.
In addition, Lexmark has announced that effective as of 2 April 2018, the OEM has entered into a Security Agreement with China CITIC Bank, as collateral agent for the benefit of the co-secured parties under the Security Agreement.
According to Lexmark: “Pursuant and subject to the terms of the Security Agreement, the Company granted to the Collateral Agent, for the equal and rateable benefit of the co-secured parties, a first priority lien on and security interest in (subject to permitted liens), those assets of the Company that are expressly subject to the Security Agreement (the “Collateral”). “
“We are pleased to announce the completion of this agreement,” said Art Richards. “Lexmark is a financially stable company with strong investor backing, and we are positioned for profitable growth.”
Categories : City News
