FuelCell Energy, Inc. (FCEL - Free Report) recently announced the pricing of its underwritten public offering of 43.5 million shares at a price of $2.10 per share. This will generate gross proceeds of $91.4 million and is expected to close on or about Oct 2, subject to customary closing conditions.
The company also provides the underwriters a 30-day option to purchase up to 6,525,000 additional shares.
Benefits of the Pricing
FuelCell intends to use the net proceeds for project development and financing, working capital and general corporate purposes. Also, a fractionof the proceeds might be used to pay the principal redemption price and accrued dividends on the preferred stock issued by one of its subsidiaries and repay other outstanding debt as well.
While the near-term equity issuance will increase the number of outstanding shares, resulting in earnings dilution, in the long term, it will benefit FuelCell by reducing its debt and funding capital projects.
Coming to the company’s debt situation, we observe that the company has outstanding debt and financing obligations of $175.7 million as of Jul 31, 2020 while its cash and cash equivalents stood at $66.3 million. Currently, the company’s debt-to- total capital is pegged at 65.8%, comparing unfavorably with the industry average of 49.9%. Thus, refinancing through the latest equity issuance seems a prudent strategy on FuelCell’s part to lower its debt.
Other companies from the same sector are also making efforts to trim their debt obligations. Notably, they aretapping the opportunity of near-zero interest ratesto procure debt at cheaper rates, repay or refinance their debt obligations and also curb their debt-servicing costs. Recently, Covanta Holding Corporation (CVA - Free Report) , Bloom Energy Corporation (BE - Free Report) and Linde plc (LIN - Free Report) undertook such initiatives to refinance their debts.
Zacks Rank & Price Performance
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past six months, shares of the company have rallied 69.6%, outperforming the industry’s 7.2% growth.
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