Tear Sheet: ADT Inc.'s Debt Repayment Offsets EBITDA Decline From Asset Sale, Leverage Improves

ADT recently announced plans to sell its commercial business, which accounts for about 20% of revenues and 5% of EBITDA, in the fourth quarter 2023. It plans to use the asset sale proceeds of about $1.5 billion to reduce debt, positioning the company well above its previous goal of reducing debt by $1 billion through 2025. We view this larger debt reduction as credit positive because it would mitigate the effects of lower EBITDA and cash flows. We now expect debt to EBITDA of about 3.5x at year-end 2023 compared to our previous expectations of modestly under 4x. We think the company would gain greater flexibility from lower leverage as it executes its business plans that include profitably growing the

...August 17, 2023 Larger debt reduction is an important credit consideration as EBITDA declines and business diversity narrows. ADT recently announced plans to sell its commercial business, which accounts for about 20% of revenues and 5% of EBITDA, in the fourth quarter 2023. It plans to use the asset sale proceeds of about $1.5 billion to reduce debt, positioning the company well above its previous goal of reducing debt by $1 billion through 2025. We view this larger debt reduction as credit positive because it would mitigate the effects of lower EBITDA and cash flows. We now expect debt to EBITDA of about 3.5x at year-end 2023 compared to our previous expectations of modestly under 4x. We think the company would gain greater flexibility from lower leverage as it executes its business plans that include profitably growing the solar business. Performance in the consumer and small business segment remains solid and we are holding our operating assumptions unchanged. This segment continues...

Full Report