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Steel Dynamics (STLD) Closes Notes Offering Worth $400M

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Steel Dynamics, Inc. (STLD - Free Report) has completed the sale of $400 million aggregate principal amount of its 5.000% Senior Notes due 2026. The notes were sold in a private offering to qualified institutional buyers.

Steel Dynamics will be utilizing the proceeds from the sale, along with other cash in hand, to purchase either a part or all of the outstanding $400 million principal amount of its 6.125% Senior Notes due 2019, as per the company’s previous announcement of the cash tender offer. The company will also redeem or repurchase any 2019 Notes not purchased in the Tender Offer, as stated in the indenture governing the Notes along with bearing related fees and expenses.

The issuance of the new notes and the retirement of the 2019 notes will help Steel Dynamics to increase its debt maturity profile. Moreover, the company’s interest expenses will also decrease post the completion of these actions.

Shares of Steel Dynamics rose roughly 1.9% to $38.86 on Dec 6.

Steel Dynamics reported adjusted earnings of 65 cents per share in the third quarter of 2016, which was within management’s expected range of 63−67 cents and above the prior-year quarter figure of 25 cents. The improvement in the bottom line was backed by the positive momentum in the flat roll metal spread expansion which boosted operating earnings which met the Zacks Consensus Estimate. Sales for the reported quarter increased 7.7% year over year to $2.1 billion.

Steel Dynamics expects fourth-quarter 2016 to see lower volumes due to seasonality, along with weaker pricing. However, the automotive sector is expected to grow in 2017, which should boost sales. The construction sector is also expected to grow, particularly in terms of large infrastructure projects. Further, the company expects the energy sector to witness some improvement as well.

Steel Dynamics’ strong balance sheet and liquidity have enabled the option of a share repurchase program in addition to the capital allocation strategy. The company remains committed to increasing shareholders’ value via organic and strategic growth.

Zacks Rank & Key Picks

Steel Dynamics currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the steel space include POSCO (PKX - Free Report) , Grupo Simec S.A.B. de C.V. (SIM - Free Report) and AK Steel Holding Corporation .

POSCO has an expected long-term growth of 5% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Grupo Simec, with a Zacks Rank #2 (Buy), saw its estimates for the current quarter increase roughly by 53% in the last 60 days.

AK Steel has an expected long-term growth of 5%. The company carries a Zacks Rank #2.

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