Janus Capital Group Inc. (JNS) recently entered into a privately negotiated deal in which it will exchange about $117 million of newly issued 0.75% Convertible Senior Notes with $110 million worth of existing 3.25% Convertible Senior Notes. The former notes will mature in 2018 and the latter in 2014.
The interest rate of 0.75% per annum on the newly issued notes needs to be paid on a half-yearly basis. Further, under certain conditions, these can be converted into cash or shares of Janus’ common stock, or a combination of both, according to the company’s discretion.
The initial conversion rate of the newly issued notes is 92.0598 common shares per $1,000 principal amount of the same notes. This amount is equivalent to an initial conversion price of approximately $10.86 per share of common shares, subject to certain conditions. The initial amount corresponds to a premium of 25% to the company’s closing price of $8.69 per share on Jun 13.
The company has also entered into a privately negotiated convertible note hedge and warrant agreement. Under the terms of this deal, the conversion price can be increased to approximately $12.60 per share. This represents a 45% premium to the closing price as of Jun 13, 2013.
If the warrant agreement is used, the company will repurchase common shares to compensate the resultant dilution. The repurchase of common shares will rest on Janus’ discretion, subject to terms and conditions.
The aforementioned transaction will facilitate in reducing the company’s annual interest expense, extending its present debt maturities as well as boosting financial flexibility. The financial flexibility provided will enable the company to pay off its long-term debt obligations whenever a suitable opportunity arises in the future.
Janus currently carries a Zacks Rank #3 (Hold). Better performing stocks include Artisan Partners Asset Management Inc. (APAM), Noah Holdings Limited (NOAH) and Virtus Investment Partners, Inc. (VRTS). All these stocks carry a Zacks Rank #1 (Strong Buy).
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