30 August 2019 by jbchevrel
Dell Inc (DELL) was the best performer in CDX HY. The 5y CDS today tightened by 53bp or 22% of the spread, after they raised their full-year profit outlook. Allegedly with more confidence. Indeed, DELL narrowed its annual revenue projection to [$92.7B,$94.2B]. It seems that companies have been upgrading their personal computers to get Windows 10, boosting demand for PCs. The stock also gained 8% on day as I write. Still down c28% from May peak. The PC division grew +6% in the quarter alone, with commercial sales +12%. More generally, sales growth was strong. Indeed, reported revenue gained 2% to $23.4B. The negative outlier was the revenue from data-center hardware -7% to $8.6B as server/networking gear revenue fell -12%, reverting from last year. That was coupled with a significant improvement in operating margins. DELL has $53B total debt outstanding and $10B cash. However core debt (total principal debt less unrestricted subsidiary debt, DFS related debt and other) is $36B. So net core debt is closer to $30B than $40B. Noteworthy that >50% of out debt is maturing by end-24. The picture will improve, on the paper, as DELL plans to pay down $5B debt due this fiscal year (FCF generation, cash on hand, additional borrowing). Elsewhere, it was a bit of a reversal in CDS world, with spreads widening across Europe and the US. The CDX HY s32, which contains DELL, widened by +bp, now just above 340 mark, ahead of the three-day weekend there.