Leucadia National Corporation recently announced its plans of redeeming a portion of its long-term debt on March 15, 2012. Total redemption value will amount to approximately $528.3 million.
Redemption of long-term debt will include the entire 7-1/8% Senior Notes due 2017 and 8.65% Junior Subordinated Deferrable Interest Debentures due 2027. The company will be paying 103.563% of the principal amount for the Notes and 102.1395% of the principal amount for the Debentures as well as accrued and unpaid interest.
Bank of New York Mellon, the Trustee for the Notes and the successor Trustee for the Debentures, will be acting as paying agent. Exiting the third quarter, Leucadia’s long-term debt was flat at $1,471.3 million compared with $1,471.2 million in the previous quarter.
Of late, Leucadia reduced its holding in Fortescue Metals Group Ltd. by selling off roughly 100 million shares of the latter. Net proceeds from the sales amounted to $506.54 million, resulting in $417.9 million of net gain on securities sales for Leucadia. Subsequent to the sale, Leucadia still holds roughly 30.6 million shares of Fortescue.
Leucadia engages in manufacturing oil and gas drilling services, gaming entertainment, real estate activities, medical product development operations and various other activities involving investments in the United States.
We believe the company largely benefits from extensive diversifications into a variety of businesses. The company’s strategy to grow through acquisitions of companies in crisis increases its profitability. However, investing in volatile materials such as base metals reduces the value of the company’s investments. The company competes with other players in the industry including Apollo Investment Corporation (AINV - Snapshot Report) and The Blackstone Group (BX - Analyst Report), among others.
The current Zacks Consensus Estimate for the fourth quarter of 2011 is a 24 cent loss, representing annual decline of 103.55%. Estimates for the fiscal years 2011 and 2012 are a loss of 64 cents and earnings of $1.58, representing a year-over-year decline of 108.36% and growth of 346.88%, respectively.
We currently maintain a Neutral recommendation on Leucadia.