Flex Borrowed $4.4 Billion On 364-Day Loans For EPC Power, With A Spin-Off As The Repayment Plan
Flex guarantees $2 billion of Axiom preferred stock that must be redeemed at a premium if the spin-off misses a December 2027 deadline.
Flex, the contract manufacturer that also sells power and cooling products, paid for its $4.4 billion EPC Power acquisition with $3.3 billion of term loans and $1.1 billion of bridge loans, all due October 13, 2027, according to its 10-Q filed Friday. The plan is to repay them from the planned spin-off of its Cloud and Power Infrastructure segment, now named Axiom.
Loans due in October 2027
Flex borrowed the full $3.3 billion under a credit facility and the full $1.1 billion under a bridge facility on October 14, the day it completed the EPC Power purchase for about $4.4 billion in cash. Each matures 364 days after funding, on October 13, 2027.
Repayment is meant to come from a cash distribution Axiom makes to Flex, financed by Axiom's own term loans and a $2.0 billion Series A convertible preferred stock sale. Once Axiom's loans fund, Flex has one business day to prepay its term loan. A spin-off that slips past maturity or never happens would leave Flex needing up to $4.4 billion elsewhere, and the filing warns that money may be unavailable on acceptable terms.
The filing's pro forma figures put interest expense at $57 million per quarter on the two EPC loans.
A $2 billion guarantee
Flex has guaranteed the redemption of Axiom's preferred stock, a risk factor that is new this quarter. Should the spin-off not occur before December 31, 2027, Axiom must buy back the shares: 115% of the $2 billion stated value in cash, or 125% in Flex shares, with Flex approving the choice.
Either route hurts Flex: cash drains liquidity or adds debt, shares dilute owners.
The preferred investment, 200,000 shares for $2.0 billion, was agreed on October 2. If it funds before the spin-off, the proceeds would reduce the EPC loans.
The business behind the bet
Flex's Cloud and Power Infrastructure segment, which EPC Power joins, earned segment income of $268 million in the quarter ended September 25, against $136 million a year earlier, on sales of $2.5 billion. Flex announced the spin-off plan on May 5. It is targeted for the first quarter of calendar 2027 and needs approval from Flex's board, its shareholders and the High Court of Singapore, plus SEC effectiveness of Axiom's Form 10.
Flex had $3.1 billion of cash and about $5.2 billion of borrowings at September 25. It repurchased no shares in the six months, and the authorization stands at $2.0 billion. Quarterly net income was $263 million.
Flex's term loans mature October 13, 2027, and the preferred redemption trigger is December 31, 2027; the spin-off is targeted for early 2027.
Sources
- 10-Q Filing — Flex Ltd. (FLEX) — SEC EDGAR
- 10-Q Filing — Flex Ltd. (FLEX), Q1 FY2027 filed 2026-07-31 (comparison basis) — SEC EDGAR
- Earnings release (8-K Item 2.02, flexex991-9252026.htm) — Flex Ltd., filed 2026-10-28 — SEC EDGAR
- Flex: Fiscal Q2 Earnings Snapshot — Associated Press
- Flex (FLEX) Q2 Earnings: Taking a Look at Key Metrics Versus Estimates — Yahoo Finance
- Flex soars 12% on quarterly results (FLEX:NASDAQ) | Seeking Alpha — seekingalpha.com
- FLEX Q2 Earnings Beat Estimates on CPI Strength, Outlook Raised — Yahoo Finance
- FLEX REPORTS SECOND QUARTER FISCAL 2027 RESULTS – Company Announcement - FT.com — Financial Times
