Back to top

Discover to Replace Senior Notes

Read MoreHide Full Article

Discover Financial Services (DFS - Free Report) has announced an offer to exchange its outstanding 10.25% senior notes, due 2019, and 6.45% senior notes, due 2017, with new senior notes, due 2022. The old notes have an outstanding principal of $400 million, a portion of which will be reimbursed in cash.

The new notes will be issued for a minimum aggregate principal value of $250 million. Moreover, the 10.25% senior notes will get priority during replacement.  While all of the 10.25% notes will be replaced, the 6.45% notes will only be exchanged if the principal value of the new notes, issued in place of the 10.25% notes, does not exceed $250 million.

Further, the 6.45% notes will be replaced on a pro-rata basis to the extent that the aggregate principal value of the new notes, issued in replacement of both types of old notes, reaches $250 million. Additionally, the 6.45% notes will only be replaced for a maximum of $50 million principal value of the new notes.

The exchange offer is only open to qualified institutional buyers and people who are not U.S. persons, as defined in the Securities Act of 1933. Moreover, if the non-U.S. person is a resident of a member state of the European Economic Area, covered by Directive 2003/71/EC, then that person should be a qualified investor, as defined in the Prospectus Directive.

The exchange offer is valid till May 4, 2012. However, holders of old notes, who apply for the exchange offer and do not withdraw their tender before April 20, 2012, will receive an early exchange premium of $50 per $1000 principal value. Additionally, valid tenders cannot be withdrawn after April 20, 2012.

Discover holds the right to extend the date of the exchange offer as well as the withdrawal deadline. Additionally, the company will not register the new notes under the Securities Act or any state securities laws.

Discover is a cards and electronic payment services company. The company competes with credit card giants such as MasterCard Inc. (MA - Free Report) and Visa Inc. (V - Free Report) .

Currently, Discover carries a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating. We maintain our long-term ‘Outperform’ recommendation on the stock.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Mastercard Incorporated (MA) - free report >>

Visa Inc. (V) - free report >>

Discover Financial Services (DFS) - free report >>

More from Zacks Analyst Blog

You May Like