The Western Union Co. (WU), a leader in global money transfer and payment services, announced that it has closed $400 million debt offering by selling senior notes that carry a coupon interest of 3.65%, maturing in 2018.
The net proceeds of approximately $397.9 million from the notes issuance will be used for general corporate purposes including funding a part of Western Union’s 5.4% senior unsecured notes that are slated to retire in November 2011.
The notes issuance was increased from the original planned amount of $350 million. The notes carry a rating of “A3” by Moody’s Corp. (MCO) and “A-” by both Standard & Poor and Fitch Ratings. All the ratings imply a investment grade level, signifying a low default risk.
Western Union keeps issuing notes from time to time. Last year during June, the company issued $250 million of 6.20% notes due 2040. The proceeds were used to repay loans and for other general corporate purposes.
Since the company’s spin-off from First Data in 2006, its interest coverage ratio has averaged around 7.5:1. The decline in the ratio from the previous levels was due to the debt acquired in connection with the spin-off. Since then, debt levels have stood at approximately $3–$3.5 billion. The debt-to-capital ratio as of June 30, 2011 was 90.0%.
However, it is to be noted that Western Union stands solid with $2.1 billion of cash and cash equivalents as of June 30, 2011. The company has a strong working capital position as well. However, it expects two factors to impact the working capital in 2011. Firstly, the company is mulling over spending a major portion of the cash for the restructuring charges incurred in 2010 and 2011. The second item impacting working capital relates to an inflow in 2010 that will not reoccur to the same extent in 2011. In March last year, the company entered into a debt modification transaction, whereby it exchanged $303.7 million of aggregate principal amount of its 2011 notes by issuing new notes due April 1, 2020.
Western Union continues to execute its expansion strategies, deploy cash for investments in the business, strategic acquisitions, share buybacks and dividends, as well as target a strong balance sheet.
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WESTERN UNION (WU): Free Stock Analysis Report
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