FirstEnergy Corporation (FE - Analyst Report) closed the tender offerings of up to $1,080.0 million. The tender offer comes from FirstEnergy’s subsidiaries, FirstEnergy Solution Corp (“FES”) and the recently merged Alleghany Energy (“AE”) Supply Company.
The tender offering is subject to the satisfaction or waiver of certain financing and other conditions. The maximum tender offer of $1,080.0 million will terminate on Mar 27, 2013. The debts will be financed with proceeds from the company’s money pool of its unregulated businesses.
FirstEnergy’s motive behind the tender offer was to improve the balance sheet position of FES and Alleghany. The company had initially announced the notes offering on Feb 28, 2013.
The tender offer is provided in four separate offerings as per the conditions drafted in the Offer to Purchase and related Letter of Transmittal as on Feb 28, 2013. The first includes offering of $350.0 million, 5.75% notes due 2019 while the second involves offering of $250.0 million, 6.75% notes due 2039 by Alleghany Supply.
The next tender will be carried out by FES and entails an offering of $480.0 million, 6.80% senior notes due 2039 and an additional maximum tender amount of $585.0 million, 6.05% senior notes due 2021.
The holders of 6.05% notes who have tendered their notes before Mar 13, 2013 will be entitled to receive the total consideration including an early premium of $50 per $1,000 principal amount of notes. Holders of 6.05% notes who have tendered their notes after the early tender date and before the expiration date will be eligible for an amount net of total consideration and early tender premium. The holders carrying 6.05% notes till the tender date will not be entitled to withdraw their 6.05% notes.
The company’s debt-to-equity ratio at the end of 2012 was 115.9%, down from 118.1% at year-end 2011. However, the redemption will lower the interest burden of the company unless new debts are issued.
Presently, the company carries a Zacks Rank #3 (Hold). Other utility stocks we presently prefer are Zacks Ranked #1 (Strong Buy) Brookfield Infrastructures Partners L.P. (BIP - Snapshot Report), Pike Electric Corporation and Otter Tail Corp. (OTTR - Snapshot Report).
Based in Akron, OH, FirstEnergy, a diversified energy holding company, is engaged in the generation, transmission, and distribution of electricity in the United States.