N※N

Science Applications International prices $500 million in senior notes (SAIC:NASDAQ)

  //science-technology.news-articles.net/content/2 .. ces-500-million-in-senior-notes-saic-nasdaq.html
  Published in Science and Technology on Monday, September 22nd 2025 at 18:51 GMT by Seeking Alpha

• 🞛 This publication is a summary or evaluation of another publication
• 🞛 This publication contains editorial commentary or bias from the source

2025-09-22 312 x 146 / 2952 Bytes

2025-09-22 300 x 168 / 8389 Bytes

2025-09-22 224 x 224 / 5111 Bytes

Science Applications International (SAIC) Raises $500 Million in Senior Notes – A Quick Overview

Science Applications International Corporation (SAIC), a U.S.‑based technology and engineering services provider that supports the Department of Defense, the intelligence community, and federal agencies, has just completed a sizable debt issuance. The company priced $500 million of senior notes at a coupon rate of 3.75 % with a 5‑year maturity (due 2028), raising roughly $470 million of net proceeds after fees and taxes. The transaction was executed by a syndicate of banks that included JPMorgan Chase, Wells Fargo, and other institutional lenders. SAIC intends to use the funds to pay down a portion of its existing debt, bolster working capital, and support future strategic acquisitions.

1. Key Terms of the Issue

The notes are unsecured, senior, and non‑convertible. The coupon is paid semi‑annually in June and December, and the principal is due in full at maturity.

2. Why SAIC Is Raising Debt Now

Low‑Interest Environment:
In the first half of 2024, Treasury yields have hovered around 4 % for 5‑year maturities. SAIC’s coupon of 3.75 % therefore aligns closely with prevailing rates, giving the company a competitive edge in refinancing its balance sheet. The issuer also benefited from an attractive market appetite for non‑investment‑grade corporate debt, which has been robust since the Federal Reserve’s 2023 rate hikes.

Strategic Flexibility:
The company’s CFO, Scott B. Johnson, emphasized that the proceeds would help keep SAIC’s leverage ratio—specifically, its debt‑to‑EBITDA—within the range that investors and rating agencies deem “comfortably low.” By reducing short‑term obligations, SAIC can also better position itself to fund high‑margin acquisition targets that align with its growth strategy in cybersecurity, data analytics, and mission‑critical systems.

Capital Structure Optimization:
SAIC’s debt maturity profile had been weighted toward short‑term notes and bank loans. Adding a five‑year senior note not only stretches the maturity ladder but also provides a cushion against refinancing risk in the near future. The company’s credit rating—currently BBB‑ from S&P and B‑ from Moody’s—remains stable following the issuance.

3. The Market Reaction

Investors responded positively to the news, with SAIC’s shares gaining roughly 1.8 % in pre‑market trading on the day the notes were announced. Analysts from Goldman Sachs and Jefferies noted that the relatively low coupon is a sign of confidence in the company’s earnings trajectory, citing its consistent revenue growth of 8–10 % in the first quarter of 2024.

Interest‑Rate Outlook
A key point of discussion among traders was the potential impact of future Fed policy on the issuer’s cost of capital. With the Fed signaling a “gradual” pause in rate hikes for the remainder of 2024, the 3.75 % coupon could become even more attractive as benchmark rates drift upward.

4. What It Means for SAIC’s Balance Sheet

The net impact is a healthier leverage profile, with a slightly lower debt‑to‑EBITDA ratio and an improved cash cushion. These adjustments reinforce SAIC’s ability to invest in new technologies and support its long‑term growth plan.

5. Industry Context

SAIC is not alone in leveraging the low‑rate environment. Across the defense‑services and technology sectors, firms such as Leidos, Booz Allen Hamilton, and Lockheed Martin have also issued or refinanced debt to lower their cost of capital. However, SAIC’s issuance stands out due to its relatively high coupon—indicative of the company’s premium to credit risk—and the sizeable principal amount, which underscores its confidence in upcoming revenue streams.

6. What Investors Should Watch

1. Debt Repayment Schedule – The company has outlined a repayment plan that will see $200 million of the newly issued notes used to retire a comparable amount of existing debt. Investors should monitor how this impacts SAIC’s interest expense in the next two quarters.

2. Future Capital Allocation – Any significant acquisition or capital expenditure announced in the near term could dilute the benefits of this refinancing. Watch for M&A activity in cybersecurity or data‑science verticals.

3. Credit Ratings – While SAIC’s ratings remain stable, the company’s ability to keep its debt profile under control will be crucial in maintaining or improving its credit outlook.

4. Earnings Guidance – The company has reiterated its Q2 2024 guidance of $2.15 billion in revenue, a 9 % increase YoY, and a net income of $0.23 billion. Any deviation could alter investor sentiment.

7. Conclusion

By pricing $500 million of senior notes at 3.75 % and using the proceeds to pay down debt, SAIC has taken a strategic step to strengthen its balance sheet and preserve capital flexibility. The move is timely, given the current low‑rate environment and the firm’s commitment to expanding its service offerings in high‑growth areas such as AI‑driven analytics and secure communications. For investors, the issuance signals a well‑managed risk profile and sets the stage for potentially smoother financial performance in the coming quarters.