WEX Inc. is offering 4.75% senior secured notes worth $400 million with maturity scheduled in 2023.
The proceeds from the issuance will be deployed to pay off the pending amount of the company’s senior secured credit facility and related expenses as well as for general corporate purposes.
WEX is expected to close the transaction on January 30, 2013. The new issuance will require the company to pay interests half-yearly.
As of Sep 30, 2012, the debt-to-capital ratio for the company was 0.28x which represented an improvement of 1 percentage point from 0.29x at 2011 end. However, the current issuance of $400 million will have no material impact on the debt-to-capital ratio.
The new issuance would require WEX to pay an annual interest of $19 million. Nevertheless, the company’s solid operational performance generates enough funds to service the debt uninterruptedly. Its interest expense in the third quarter reduced 14.3% year over year.
Last December, Equifax Inc. (EFX - Free Report) , from the same industry, decided to offer $500 million aggregate principal amount of 3.30% senior notes. The company intended to utilize the proceeds from the issuance to fund its pending acquisition of certain credit services assets from CSC Credit Services Inc. partially.
WEX is expected to release its fourth-quarter and full year 2012 earnings results on Feb 6. The Zacks Consensus Estimate for the fourth quarter is currently pegged at $1.06 translating into year-over-year improvement of 8.3%. Earnings for full year 2012 are expected to be $4.06 per share up 11.6% year over year.
WEX carries a Zacks Rank #3 (Hold). Other payment processors like Heartland Payment Systems Inc. carries Zacks Rank #1 (Strong Buy) while MasterCard Incorporated (MA - Free Report) carries Zacks Rank #2 (Buy) and are worth noting.