Jabil takes a hit on iQor holdings

Jabil Inc. said it will take a $30 million non-cash charge during the fourth quarter of its 2019 fiscal year, after a swap of preferred iQor stock.

The stock swap followed iQor’s decision to sell its international logistics and product service assets.

The announcement provides insight for investors and customers into two major St. Petersburg companies.

iQor, with call centers and electronics repair operations, has been headquartered in St. Petersburg since its 2014 purchase of the aftermarket division of Jabil Inc. (NYSE: JBL).

The $725 million purchase price included $675 million in cash and $50 million in senior nonconvertible preferred stock of iQor. That stock accumulated dividends at an annual rate of 8 percent and was due to mature in 2023.

The value of that nonconvertible preferred stock has been declining, according to a filing by Jabil with the U.S. Securities and Exchange Commission. As of Aug. 31, 2018 — the most recent date for which Jabil has disclosed data — the stock had a fair value of $47.3 million, down from $49.8 million a year earlier.

Jabil now is swapping that stock for iQor’s Series SS senior non-convertible cumulative preferred stock, a Sept. 13 announcement said. The new stock Jabil holds is valued at between $55 million and $75 million, based on final maturity date, the announcement said.

Jabil entered into the stock swap after iQor sold its logistics and product service assets in Europe, Asia, South America and Canada, as well as some non-core operations in the United States, in June. After the sale, iQor said it expected to have about $1 billion in revenue and more than 45,000 employees, with operations in eight countries support more than 100 clients.

Moody’s Investors Service said in a June 5 report that the sale was “credit positive” but it did not impact the speculative rating Moody’s previously assigned to iQor. Moody’s also retained its negative outlook for iQor, issued in November 2018 when iQor got a temporary liquidity reprieve. “The fundamental need to restructure remains unchanged. It remains unclear at this juncture whether iQor will be able to improve its long-term profitability and operating cash flow as well as execute successfully the business restructuring plan,” Moody’s wrote in November.

Standard & Poor’s also has a negative outlook and a speculative credit rating for iQor.

A spokesman for iQor declined comment on the stock swap.

While Jabil expects to take a non-cash charge on its net income, it does not expect the stock swap to have an impact on its net core earnings, a figure that does not include a variety of impairment charges and adjustments. Jabil has projected operating income at $169 million to $235 million and core operating income at $215 million to $275 million for the fourth quarter of fiscal 2019, which ended Aug. 31.

Jabil, an electronics manufacturer and the largest company headquartered in St. Petersburg with more than $22 billion in revenue, is scheduled to announce financial results for the fourth quarter and full year of fiscal 2019 on Sept. 24.