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Franklin Prices Senior Notes (revised)
by Zacks Equity ResearchSeptember 21, 2012 | Comments : 0 Recommended this article: (0)
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In order to finance the acquisition of K2 Advisors LLC, Franklin Resources Inc. (BEN) announced the pricing of a registered public offering aggregating $600 million. The offering includes $300 million of senior unsecured notes due in 2017 and $300 million of notes maturing in 2022. The former notes are priced at 99.455% and carry a coupon rate of 1.375%, whereas the latter are priced at 99.750% with an interest rate of 2.800%.
The new notes have been rated ‘A1’ by Moody's Investors Service – a credit rating arm of Moody's Corporation (MCO).
Franklin anticipates the offering to be completed by September 24, 2012, subject to certain customary conditions. Merrill Lynch, Pierce, Fenner & Smith Incorporated – a wing of Bank of America Corporation (BAC) – and Morgan Stanley & Co. LLC – a unit of Morgan Stanley (MS) – are acting as the joint book-running managers for the offering.
The sale proceeds from the offering are planned to be used for general corporate purposes. Additionally, these proceeds are expected to be utilized for the redemption of the outstanding notes scheduled to expire on May 20, 2013, having a coupon rate of 2.000%. This redemption will fund the acquisition of K2 Advisors LLC’s majority stake.
In the stringent regulatory landscape, the aforementioned offering is expected to further strengthen the balance sheet of the company as well as support its future growth. Additionally, it will help the company bring down its cost of capital.
Franklin currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the company’s fundamentals, we also maintain a long-term ‘Neutral’ recommendation on the stock.
(Note: We are reissuing this article to correct an inaccuracy. The original article, released yesterday, September 20, 2012, should not be relied upon.)
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