In order to finance its cash tender offer, FTI Consulting Inc. (FCN), a global investment advisory firm, recently announced the pricing of its private offering of senior notes worth $300 million. The senior notes, which are scheduled to mature in 2022, bear an interest rate of 6.0% and will be issued at par value.
The Baltimore, Maryland-based company expects the public offering to be completed by November 27, 2012, upon the fulfillment of certain customary conditions. The notes are also assured with some exceptions by FTI’s existing and future domestic restricted subsidiaries.
Apart from repurchasing its senior notes worth $215 million with an interest rate of 7.75% and due in 2016 under its cash tender offer, the company also plans to utilize the proceeds from the offering for the senior secured bank credit facility and general corporate purposes.
As of September 30, 2012, the company had cash and cash equivalents of $126.9 million and long-term debt and capital lease obligations, net of current portion, of $636.8 billion.
Recently, FTI reported third quarter 2012 adjusted earnings of 60 cents per share, which beat the Zacks Consensus Estimate by a penny. However, revenues lagged due to frail performance of Technology, Forensic and Litigation Consulting, and the Strategic Communications segments. Moreover, on a geographic basis, except Latin America, sales dipped in all the regions due to a sluggish economic environment.
However, we believe that the company’s strategy to expand through acquisitions, particularly in the international markets, remains one of its key growth drivers. FTI provides specialized consulting services across 24 countries with a total headcount of more than 3,800 employees. The company recently acquired KMQ, which will likely strengthen its position in Australia. Furthermore, management’s plan to drive profitability by restructuring the company’s business and enhancing shareholders’ value through share repurchase is likely to be favorable.
Currently, FTI, which competes with the likes of Exponent Inc. (EXPO), carries a Zacks #3 Rank, implying a short-term ‘Hold’ rating. Our long-term recommendation on the stock remains Neutral.
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