Balancing Act With Special Dividend
In its VMware spin-off evaluation, Dell is requesting that VMware pay Dell Technologies shareholders a one-time special cash dividend as part of the divestment. Most of the money gained from this special dividend will be used to help pay down Dell’s $48 billion in long-term debt it owns from its purchase of EMC four years ago, sources told CRN.
Dell said it expects to “use its pro rata portion of the proceeds from any such special cash dividend to repay outstanding debt of Dell Technologies and for general corporate purposes.”
Dell needs to do a balancing act when it comes to the dollar figure amount of the special dividend in order for VMware to retain its credit rating and balance sheet while at the same time providing Dell a large amount of money.
“Dell Technologies goal would be to (1) maintain VMWare’s credit rating of investment grade and (2) improve Dell Technologies’ credit rating at, or shortly following consummation of, the spin-off,” said Dell Technologies in a recent filing with the SEC.
