Adobe Prices $1.5 Billion in New Notes; Ponzi Scheme or Debt Financing?

Jan.27.10 | About: Adobe Systems (ADBE)

From the NY Times Dealbook:

Adobe Systems, the company best known for its Adobe Reader and Photoshop software, said Monday it priced $1.5 billion in new notes, and that most of the proceeds would go to repaying its existing debt.

The notes are to be issued in two batches: $600 million with a 3.25 percent interest rate maturing in February 2015, and $900 million with a 4.75 percent interest rate maturing in February 2020, The Associated Press said.

Adobe said it intended to use the net proceeds of the sale to repay $1 billion outstanding on its credit facility and use the rest for general corporate purposes.

The offering is expected to close Feb. 1.

Relevant portion: "most of the proceeds would go to repaying its existing debt." And now, courtesy of Wikipedia, the definition of a Ponzi Scheme:

A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned.

Kinda like paying off old investors by issuing new debt to new investors...

EDIT - a commenter points out that refinancing debt into a lower interest rate is perfectly reasonable, and not a Ponzi scheme, which is absolutely correct. Said differently, it definitely matters if the old debt ADBE is paying off is 8% debt due in 2020 (which would imply refinancing), or if it's debt due in 2010 or 2011 - which would imply ROLLING (Ponzi). When I read "proceeds go to repaying existing debt" I interpreted it as the latter - using proceeds from new debt sales to pay off debt that will be due imminently, as opposed to "proceeds go to refinancing existing debt," which would imply the former.