Summary
- AT&T announces a sale/leaseback of the Hudson Yards office space, raising $2B in immediate cash.
- Financial engineering or structural improvement? In my view, the latter.
- Management continues to execute on its roadmap towards lower leverage. Continued strong 2019 execution would be a boon for shares.
- This idea was discussed in more depth with members of my private investing community, Industrial Insights. Start your free trial today »
While telegraphed for several months, the announcement that AT&T (T) would sell its stake in its Hudson Yards tower back to the developer only to lease it back has received a warm reception from the markets. While claims of “financial engineering” have run rampant since then, I hold a strong positive opinion of the deal – even though it is likely to be slightly dilutive to free cash flow and earnings per share. Companies are not run on a strict numbers basis and the benefits of flexibility and improved optics on the firm’s path to right-sizing the balance sheet after the acquisition of Time Warner more than outweigh that minor impact.
