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Wednesday, March 30, 2011

JPMorgan (JPM) Sees ADI (ADI) Bond Issue as Cash Protection

After Analog Devices (NYSE:ADI) announced it is issuing $375 million in bonds, JPMorgan (NYSE:JPM) weighed in saying they see it as tax move to protect their overseas cash.

ADI gave its reasons as using the capital for general corporate purposes.

JPMorgan’s Christopher Danely wrote in a note that the bonds are more than likely meant to allow the company to continue to keep about 70 percent of its $3 billion in cash overseas, which allows ADI to be taxed at a corporate rate of 20 percent.

The implication seems to be be that ADI doesn't believe there will be a tax amnesty offered by Congress to companies.

Danely said ADI has close $520 million in debt at this time. Add in the issuance, and that brings it to $875 million. He sees that as manageable, given that the company should produce about $900 million in operating cash flow in the fiscal year ending in October 2011.

Analog Devices was trading at $39.46, down $0.04, or 0.10 percent, as of 2:18 PM EDT.

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