Investing.com – S&P Global Ratings raised its rating on to ’BBB-’ from a lower level on Monday, citing the company’s debt reduction and expected net cash position. The outlook is stable.
Western Digital exchanged 5.8 million shares of Sandisk priced at $545 per share for debt last week. The company has been repaying debt since its spin-off of Sandisk. Last year, Western Digital exchanged Sandisk shares for a portion of its term loan A-3 and used cash to redeem $1.8 billion of its 4.75% notes due 2026.
S&P expects the only debt Western Digital will retain is $1.6 billion in convertible notes and that it will maintain a net cash position. The company also has an undrawn $1.25 billion revolving credit facility. Its $265 million of preferred shares have been converted to common stock.
S&P anticipates revenue will grow in the high-20% area for fiscal 2026, ending July 3, 2026. The ratings firm projects EBITDA margin expansion of 700 basis points this fiscal year due to strong demand, stable pricing, the adoption of technologies like UltraSMR and ePMR, and leverage of operating expenses. Strong demand for data storage, including for artificial intelligence training and inference, has increased demand for hard disk drives.
S&P expects free cash flow generation of more than $2.5 billion in fiscal 2026, compared with $1.2 billion in fiscal 2025. The ratings firm anticipates the company will use all its free cash flow for dividends and share repurchases. Western Digital is mostly sold out for calendar 2026 and has been signing long-term agreements for calendar 2027.
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