Newell Rubbermaid Inc. (NWL - Analyst Report), the manufacturer of Sharpie pens and Rubbermaid containers, recently announced the sale of $500 million senior notes. The new debt is divided into two parts -$250 million senior notes due 2015 and $250 million senior notes due 2022.
The senior notes due 2015 carry an interest rate of 2.0% p.a. and will mature on June 15, 2015, whereas the senior notes due 2022 will mature on June 15, 2022 and will pay interest at the rate of 4.0% p.a. Interest on both notes will be paid semi-annually on June 15 and December 15 of every year.
The company intends to use the net proceeds from the issuance to pay in full its 5.25% Convertible Quarterly Income Preferred Securities, lower its debt under its commercial paper program and receivables financing facility and for general corporate purposes.
Borrowing costs have gone down significantly, and in turn, facilitating the companies to obtain easy financing at compelling prices. Debt offerings of big companies are being oversubscribed, providing the corporations the option to price their offerings at lower rates. Hence, several companies are coming up with debt offerings to generate interest expense savings by refinancing their outstanding borrowings.
Prior to this, in December 2011, in an effort to enhance its financial flexibility, Newell entered into an $800 million five-year unsecured revolving credit agreement with a consortium of the world’s leading investment bankers maturing on December 2, 2016.This credit line facility helps the company to borrow funds at various interest rates with an additional facility of issuing letters of credit of up to $100 million.
Under a revolving credit facility, a company can borrow again once it repays all dues under the old credit facility. The company may utilize this fund for general corporate purposes, including repayment of outstanding commercial papers, working capital and capital investment or acquisitions.
Newell Rubbermaid is one of the leading manufacturers of home and office products in the U.S. The company also possesses a strong portfolio of widely popular brands, such as Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Levolor, Graco, Calphalon and Goody. Leveraging its strong brand equity, Newell Rubbermaid expects modest earnings going ahead, provided the market scenario improves.
The company faces intense competition from numerous manufacturers and distributors of consumer and commercial products, such as Cooper Industries plc and Avery Dennison Corporation (AVY - Analyst Report).
Newell Rubbermaid currently has a Zacks #3 Rank, implying a short-term ‘Hold’ rating on the stock. The company retains a long-term ‘Neutral’ recommendation.