GameStop (GME) Issues Senior Notes worth $350 Million

Video game retailer, GameStop Corp. GME recently declared the pricing of senior notes for a public offering, worth $350 million.

The proceeds from the offering of these 5.50% senior notes, due 2019, after discount and commissions, legal expenses and other associated costs will be around $343.5. The offering is scheduled to conclude on Sep 24, 2014.

The net proceeds will be deployed toward payment of the balance outstanding balance of its asset-based facility as well as for other general business purposes, including acquisitions, stock repurchases and dividend payout.

Last week, the company announced a private offering of $250 million worth of unsecured notes maturing in 2019. The net proceeds from this offering will be used for the payment of $400 million asset-based facility.

GameStop continues to branch out and has evolved over time as a mixed retailer of physical and digital gaming as well as electronics products. The company's venture into the digital, iDevice and gaming tablet businesses is expected to be accretive to its results. Moreover, the company's buy-sell-trade model of selling new games and buying back used ones along with its PowerUp Rewards program makes it a popular destination for shopping.

Further, GameStop is actively managing its capital. The company intends to generate adequate cash flow from operations to fund opening of new stores, refurbishment and upgrade of existing stores, buyout plans as well as share repurchase program and dividend. During the second quarter of fiscal 2014, GameStop bought back 1.90 million shares worth $75.5 million.

Borrowing costs are still considerably low in the U.S., enabling companies to obtain easy financing. Corporate bonds and borrowings from banks are in high demand as the U.S. treasuries are yielding low rates. We believe that this strategic move by the company will provide it the financial flexibility to drive long-term growth.

At present, GameStop carries a Zacks Rank #3 (Hold). Other better ranked retail stocks include Burlington Stores, Inc. BURL, Citi Trends, Inc. CTRN and Foot Locker, Inc. FL. Citi Trends and Burlington Stores are a Zacks Rank #1(Strong Buy) stock, whereas Foot Locker has a Zacks Rank # 2 (Buy).