Allegheny Technologies Inc. ATI has declared the pricing of its public offering of convertible senior notes.
Allegheny has agreed to sell $250 million aggregate principal amount of 4.75% Convertible Senior Notes due 2022. The company has granted the underwriters a 30-day option to purchase further up to $37.5 million aggregate principal amount of Notes on the same terms and conditions to cover over-allotments, if any.
The Notes will pay interest semi-annually in arrears at an annual rate of 4.75% and will mature on Jul 1, 2022, unless earlier redeemed or repurchased. The holders have the option to convert their Notes into shares of Allegheny’s common stock any time before the close of business on the business day immediately preceding the maturity date.
The conversion rate will initially be 69.2042 shares of common stock per $1,000 principal amount of Notes subject to adjustment in specific circumstances.
Allegheny plans to utilize the net proceeds from the offering for general corporate purposes, which may include voluntary or required contributions to its defined benefit pension trust or repurchases, repayment or refinancing of debt.
Shares of the company closed roughly 2.7% lower at $11.25 on May 19.
Allegheny reported an adjusted loss of 58 cents per share in first-quarter 2016. The loss was narrower than the Zacks Consensus Estimate of a loss of 59 cents.
The results exclude restructuring and transformation charges of $9 million related to the elimination of 250 workers, pre-tax costs of $26 million associated with work stoppage and return of USW-represented employees in March, and $12 million of tax benefits.
Including these one-time items, the company reported a net loss (attributable to Allegheny) of $101 million or 94 cents per share for the quarter as against a profit of $10 million or 9 cents a share a year ago. Results were affected by lower efficiency in operations due to work stoppage and the return to work of USW-represented workers. However, the re-negotiation of the labor contracts will lead to a lower retirement benefit expense of $8 million for the rest of the year.
Revenues for the first quarter fell 33% year over year to $758 million and missed the Zacks Consensus Estimate of $760 million. The decline was primarily due to lower shipments as well as lower average selling price across all products. However, sales rose around 3% from the sequentially prior quarter.
Allegheny’s cash in hand as of Mar 31, 2016 was $157 million, down 34% year over year. Long-term debt declined roughly 1% year over year to $1,492.7 million.
Cash flow used by operations for first-quarter 2016 was $61.5 million. Total debt to total capitalization was 45.4% at the end of the quarter, up from 37% a year ago.
Allegheny currently holds a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials sector include ArcelorMittal MT, POSCO PKX and Olympic Steel Inc. ZEUS, all currently holding a Zacks Rank #2 (Buy).
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