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UPS Partners
Buyout in 2013
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<blockquote data-quote="beentheredonethat" data-source="post: 1082254" data-attributes="member: 4886"><p>Personally, I agree with you on retiring debt. But I don't see that happening. Even though our debt got downgraded, it is still very good and we enjoy very low interest rates. <a href="http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=ups" target="_blank">UPS United Parcel Service Inc (UPS) debt, bond, rates, credit - Morningstar</a></p><p>If you look at the link you can see a lot of the notes and the interest rates. Keep in mind, bonds can get confusing, there are a few out there that have a relatively high interest rate, for example, 1.5 billion at 6.2% interest rate, however the bond is trading for higher then the coupon value so the actual current yield is 4.03%. (In other words to buy back the 1.5 billion bond, would cost well more then 1.5 billion. Many other of our borrowings is at much lower interest rates. Also, the good thing about the bonds is that UPS can deduct the cost of interest from our pretax operating profits, so even the 4.03% rate is a incorrect, since corporate tax rate is close to 40% (I rounded up). So the net effect to an after tax is the 4.03% rate is equal to 2.42% rate. That is lower then what we pay out in a dividend rate (which is after tax). So financially it makes no sense to pay off our debt. </p><p></p><p>What I wish they did with the money is spend a year (or two) really putting money down on UPS facilities. There are a lot of facilities that are old and aren't built well for today's package charateristics. We should build some new hubs (esp in NJ and CT area) plus I'm sure in other areas of the country. Or we could build 2 new superhubs similar to Cchil one on east coast, one on west coast. This will help to reduce the volume capacity needed at other hubs since the superhub can make more direct to preload loads.</p></blockquote><p></p>
[QUOTE="beentheredonethat, post: 1082254, member: 4886"] Personally, I agree with you on retiring debt. But I don't see that happening. Even though our debt got downgraded, it is still very good and we enjoy very low interest rates. [url=http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=ups]UPS United Parcel Service Inc (UPS) debt, bond, rates, credit - Morningstar[/url] If you look at the link you can see a lot of the notes and the interest rates. Keep in mind, bonds can get confusing, there are a few out there that have a relatively high interest rate, for example, 1.5 billion at 6.2% interest rate, however the bond is trading for higher then the coupon value so the actual current yield is 4.03%. (In other words to buy back the 1.5 billion bond, would cost well more then 1.5 billion. Many other of our borrowings is at much lower interest rates. Also, the good thing about the bonds is that UPS can deduct the cost of interest from our pretax operating profits, so even the 4.03% rate is a incorrect, since corporate tax rate is close to 40% (I rounded up). So the net effect to an after tax is the 4.03% rate is equal to 2.42% rate. That is lower then what we pay out in a dividend rate (which is after tax). So financially it makes no sense to pay off our debt. What I wish they did with the money is spend a year (or two) really putting money down on UPS facilities. There are a lot of facilities that are old and aren't built well for today's package charateristics. We should build some new hubs (esp in NJ and CT area) plus I'm sure in other areas of the country. Or we could build 2 new superhubs similar to Cchil one on east coast, one on west coast. This will help to reduce the volume capacity needed at other hubs since the superhub can make more direct to preload loads. [/QUOTE]
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