Spectrum Brands Holdings, Inc. (SPB) recently declared the pricing of senior notes for a public offering worth $250 million, by its wholly owned subsidiary Spectrum Brands, Inc. The issue price of these notes, due 2024, will be 100.00% of the face value. Also, they will carry an interest rate of 6.125% per annum.
Simultaneously, Spectrum Brands announced plans to enter a New Term Loan Facility, with its aggregate principal being roughly $186.7 million.
This consumer products company intends to utilize the proceeds from both the aforementioned transactions to repay loans drawn from its revolving credit facility, to sponsor a planned buyout and for general corporate reasons. These include the refinancing of current indebtedness, expansions, future acquisitions, working capital requirements and other needs.
Borrowing costs are still considerably low in the U.S., enabling companies to obtain easy financing. Corporate bonds and borrowings from banks are in high demand as the U.S. treasuries are yielding low rates.
The issuance of senior notes is likely to enhance the company’s already strong financial status. This is evident from the fact that Spectrum Brands generated record free cash flow of $359 million in fiscal 2014, beating its own target of at least $350 million and also coming way ahead of its year-ago free cash flow of $254 million. Also, as forecasted, the company reduced its term loan by over $250 million by the end of the fiscal.
Further, cash and cash equivalents at the end of the year stood at $194.6 million, while total debt outstanding was nearly $2,991 million.
Spectrum Brands has been undertaking efficient cost-cutting measures with plans to implement a better pricing strategy. This is evident from it adopting inorganic route.
Spectrum Brands recently decided to acquire The Procter & Gamble Company’s (PG) European Pet Foods business. Further, in October, the company announced that its Hardware and Home Improvement Group (“HHI”) has completed the pending acquisition of Tell Manufacturing, Inc. These acquisitions are expected to assist in diversifying the company’s product line and generate significant production and cost-related synergies.
Also, it remains committed to generate solid free cash flows, reduce debt levels and enhance adjusted earnings before interest, taxes, depreciation and amortization to boost shareholder value. With these continuous efforts, the company is likely to achieve its growth objectives and deliver another strong year.
Spectrum Brands currently carries a Zacks Rank #3 (Hold). However, better-ranked stocks in the consumer staples sector include Pilgrim's Pride Corp. (PPC), with a Zacks Rank #1 (Strong Buy) and Nutrisystem, Inc. (NTRI), with a Zacks Rank #2 (Buy).
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