Brown-Forman Redeems $250M Notes - Analyst Blog
26 Fevereiro 2013 - 10:50AM
Zacks
On Monday, Brown-Forman
Corporation (BF.B) concluded the earlier announced
redemption of its 5% Notes worth $250 million. This Zacks Rank #4
company utilized its available cash and short-term borrowings for
redemption purpose.
The strategy signifies the
company’s ability to generate cash flow, which has been used to
bring down debts, leading to reduction in interest expenses.
The redemption of the Notes, which
were due in 2014, will result in a pre-tax interest savings of
about $2 million and $8 million in fourth-quarter of fiscal 2013
and fiscal 2014, respectively. However, it is expected that the
company has incurred a pre-tax expense of approximately $9 million
related to the redemption.
Borrowing costs have gone down
significantly, helping the companies to obtain easy financing at
compelling prices. Corporate bonds and borrowings from banks are in
high demand as the U.S. treasuries are yielding low rates.
On Dec 12, 2012, Brown-Forman
completed its offering of $750 million unsecured senior notes.
According to the company, the notes were offered in three different
tranches having distinct maturity dates. The first $250 million
notes, carrying an annual interest rate of 1.00%, will mature on
Jan 15, 2018. Another $250 million worth of senior notes, which
were issued at an annualized interest rate of 2.25%, is due on Jan
15, 2023. The last $250 million of notes carry an annual interest
rate of 3.75% and maturity date of Jan 15, 2043.
Debt offerings of big companies are
being oversubscribed, providing corporations the option to price
offerings at lower rates. Hence, several companies are coming up
with debt offerings to lower interest expense either by refinancing
outstanding borrowings or redeeming the higher interest-bearing
debts.
Over the last 2-3 months, several
companies including FelCor Lodging Trust Inc.
(FCH) and Staples Inc. (SPLS) completed offering
and redemption of debt simultaneously to reduce interest
expenses.
Moreover, some companies are
offering debts to finance long-term investments, such as
PVH Corporation (PVH). In late Dec 2012, the
company had issued $700 million of senior unsecured notes to pay a
portion of the cash consideration related to the acquisition of The
Warnaco Group, Inc.
BROWN FORMAN B (BF.B): Free Stock Analysis Report
FELCOR LODGING (FCH): Free Stock Analysis Report
PVH CORP (PVH): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
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