New York-based online brokerage firm, E*TRADE Financial Corporation (ETFC) announced its plans to offer senior notes worth $1.3 billion. The offering will include notes maturing in 2017 and 2019, respectively. Moreover, the coupon rate, principal amount and provisions for redemption will be based on the market conditions at the time of the pricing.
The sale proceeds from the offering are planned to be used for redeeming $1.3 billion worth of 12.500% Springing Lien Notes and 7.875% Senior Notes maturing in 2017 and 2015, respectively. The amount includes the redemption premiums, principal amount, accrued interest and also the associated fees and expenses.
The joint lead book-running managers for the offering are Morgan Stanley (MS), The Goldman Sachs Group, Inc. (GS) and BofA Merrill Lynch – a unit of Bank of America Corporation (BAC).
In the third quarter, E*TRADE maintained its bank capital ratios well above the regulatory threshold. As of September 30, 2012, the company reported Tier 1 common ratio of 10.9%, up from 10.2% in the prior quarter and 9.3% in the year-ago quarter.
Total risk-based capital ratio was 19.3%, up from 18.0% in the prior quarter and 17.2% in the prior-year quarter. Tier 1 leverage ratio was 7.9%, in line with the last quarter but down from 8.1% in the prior-year quarter.
Corporate interest expense in the third quarter was $45.5 million compared with $45.3 million in the prior quarter and $44.8 million in the prior-year quarter. Further, corporate debt was $1.5 billion as of September 30, 2012 rising marginally by 0.3% sequentially and 0.8% as of December 31, 2011.
We believe E*TRADE’s proactive efforts will help it bring down the cost of capital and strengthen the balance sheet. Further, these steps are expected to favor the company’s future growth. However, E*TRADE still has a lot to do before it succeeds in releasing its portfolio from the risky mortgage assets. In addition to all these, a protracted economic recovery coupled with a low interest rate environment and regulatory challenges remain the causes for concern.
E*TRADE currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain our long-term Neutral recommendation on the stock.
BANK OF AMER CP (BAC): Free Stock Analysis Report
E TRADE FINL CP (ETFC): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment