US-based delivery services company, FedEx Corp., has announced the completion of the offerings of $1.75 billion of USD-denominated notes and €1.25 billion of euro-denominated notes.
A portion of the proceeds of the debt offerings, which received strong market support, will be used with existing cash to redeem $5.8 billion USD of the company’s existing debt. This will eliminate near-term debt obligations taken on during the early stages of the Covid-19 pandemic. An additional portion carries historical significance for the company and the industry, representing the first sustainability bond ever issued by a North American transportation and logistics company.
Key features of the transactions include:
- Substantial overall debt reduction. The debt offerings and subsequent redemptions, which were completed in May, represent the largest series of related debt transactions in company history and will result in the net reduction of $2.6 billion USD in
FedEx debt obligations. Eliminating these obligations will effectively reduce the company’s total debt portfolio by 11 per cent and significantly strengthen its balance sheet, taking advantage of a favourable interest rate environment.
- Elimination of near-term debt maturities. Using proceeds from the debt offerings and existing cash, FedEx will eliminate all debt maturities through fiscal year 2025 and one tranche in fiscal year 2027, strengthening the company’s balance sheet and providing liquidity and flexibility in the coming years.
- Flexibility for the future. FedEx will maintain its strong liquidity and cash position, providing flexibility in a still-challenging macroeconomic environment even as total outstanding obligations are materially reduced.
Additionally, the offerings include an eight-year, €600 million sustainability bond tranche in Europe.
This is the first sustainability bond issued by a North American transportation and logistics company and is one of the ways FedEx will fund its efforts to achieve its goal of carbon-neutral operations by 2040.