Unisys Announces Stock-Split

Unisys Corp. (UIS) recently announced that its Board of Directors has approved a one for ten reverse stock-split of the common stock. The stock split is expected to be effective on or about Oct 26.

At an annual meeting in May, the board decided to approve a reverse stock split at a ratio between one-for-five and one-for-twenty.

When the reverse stock split becomes effective, every ten shares of issued and outstanding common stock will automatically be combined into one share. There will not be any change in the par value of the shares. The number of authorized shares will also be proportionately reduced from 720 million to 72 million.

No fractional shares will be issued in connection with the reverse stock split. Following the completion of the reverse stock split, the company’s transfer agent will aggregate all of the fractional shares, that otherwise would have been issued as a result of the reverse stock split, and sell them. Stockholders who would otherwise hold a fractional share of the company’s common stock will receive a cash payment in lieu of such fractional share, equal to their pro rata share of the proceeds received by the transfer agent from such sale.

In August, Unisys completed its private debt exchange offers and reduced its debt outstanding by approximately $130 million (about 12%) and thereby reduced 2010 debt maturities to $65 million. The private debt exchange offer involved the exchange of outstanding unsecured senior notes of the company for secured notes, common stock and cash.

After the debt exchanges, the company still has approximately $300 million of notes of different maturities outstanding. UIS was struggling with a high debt level of $1061.2 million at the end of the June quarter.

The stock took a hit earlier due to the debt overhang and weak quarterly results. The restructuring initiatives undertaken along with improving business environment in the second half of 2009 should lead to an improvement in performance. We maintain our Neutral rating on the stock.

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