On Nov 12, E*TRADE Financial Corporation (ETFC), the online brokerage firm, unveiled its debt restructuring plans. The company announced lowering of its outstanding corporate debt as well as refinancing of its existing debt to extend the maturity date. Additionally, the company has set up a $200 million revolving credit facility, which is likely to positively impact its liquidity position.
Specifically, the proposed plan involves reduction of corporate debt by $400 million through cash. Also, issuance as well as pricing of $540 million eight-year notes has been announced for redeeming two tranches of existing debt and paying redemption premiums.
These two tranches of debt include 6.750% Senior Notes due 2016 and 6.000% Senior Notes due 2017. Though subject to certain customary closing conditions, the company expects the sale to close by Nov 17, 2014.
Notably, in third-quarter 2014, E*TRADE reported earnings per share of 29 cents, which outpaced the Zacks Consensus Estimate of 22 cents. As of Sep 30, 2014, E*TRADE had total assets and corporate debt of $45.8 billion and $1.8 billion, respectively. The company had corporate cash worth of $610 million as of Sep 30, 2014.
This debt-restructuring initiative is likely to aid the company’s financials, going forward. The refinancing of the existing debt by E*TRADE will extend average maturity on debt commitments 3.5 years to 6.2 years. Moreover, three-year, $200 million senior secured revolving credit facility, will boost its liquidity position in the near term.
Currently, E*TRADE holds a Zacks Rank #3 (Hold). Better-ranked investment managers include Piper Jaffray Companies (PJC), Arlington Asset Investment Corp. (AI) and The Goldman Sachs Group, Inc. (GS). While Piper Jaffray sports a Zacks Rank #1 (Strong Buy), both Arlington Asset Investment and Goldman Sachs carry a Zacks Rank #2 (Buy).
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