“What will eBay do with $750 million?” a reader asked upon reading that the company was raising that amount by offering 6% notes. According to eBay’s press release on Monday, it expects its offering of $750 million in senior unsecured notes to close on February 29, 2016.
The answer: eBay said it intends to use the net proceeds from the offering for general corporate purposes, which may include capital expenditures, share repurchases, repayment of indebtedness and possible acquisitions.
It’s important to note that when a company has debt, it doesn’t mean it’s “in debt,” and eBay had signaled its move to seek additional financing last month. Here’s what eBay had to say about debt in its latest earnings call at the end of January (transcript via SeekingAlpha):
“In 2015, we repaid $850 million of debt that matured. As a reminder, we have an average investment grade rating of BBB+, which allows a gross debt-to-EBITDA ratio of up to approximately 3.5 times providing us the capacity to take an additional $3 billion to $4 billion of debt.
“As we look at our capital structure in 2016, we may seek additional outside financing to replace 2016 maturities and to provide additional financial flexibility.”
That was eBay CFO Scott Schenkel speaking. Note that he also reported that eBay ended the quarter with cash, cash equivalents and non-equity investments of $8.5 billion, including $1.5 billion in the U.S. “As a reminder, our capital allocation policy is designed to manage the capital structure in a way that optimizes our financial flexibility, access to debt, and our cost of capital to drive long-term shareholder value.”
eBay CEO Devin Wenig told investors just 2 weeks ago that the company was in acquisitions mode. While eBay hadn’t done much in that regard over the past year, he said, now that valuations have come back to earth, “expect us to be an acquisitive company.”