HCI Group Inc.
) declared that it would issue a 6 year $100 million aggregate
principal amount of convertible senior unsecured notes. The
initial buyers of these notes, that are scheduled to mature in
2019, will also be provided with an option to purchase up to an
additional amount of $15 million.
Only in cases of specific events, these notes will be
convertible, till Jan 1, 2019. After that, the notes will be
liable for conversion at any time till maturity. These notes
might be converted to cash, shares of HCI Group or a combination
HCI Group will be required to pay interest half-yearly. Its
interest expense from the Jan 2013 senior notes stood at $2.4
million in the first nine months of 2013. The latest issuance
will increase interest expense going forward. Nevertheless, the
company's solid operational performance generates enough funds to
service the debt uninterruptedly.
The proceeds from the issuance will be utilized in parts. Up to
$30 million will be used for share repurchases and the remaining
$70 million will be used for working capital requirements and
other general corporate purposes.
As of Sep 30, 2013, the debt-to-capital ratio for the company was
0.19x, up 2 percentage points sequentially. However, with the
issuance of the $100 million debt, the debt-to-capital ratio is
expected to deteriorate going forward.
Quite a few companies have been raising funds through the
issuance of debt in the last few weeks. Last month,
) had offered 5.30% senior secured notes worth $250 million with
maturity scheduled on Nov 15, 2023. Recently, Genworth Holdings
Inc., a subsidiary of
Genworth Financial, Inc.
) also offered a 4.800% senior notes worth $400 million,
scheduled to mature in 2024.
HCI Group currently carries a Zacks Rank #1 (Strong Buy). Another
stock worth considering within the property and casualty
insurance sector is
) which carries the same Zacks Rank as HCI Group.
GENWORTH FINL (GNW): Free Stock Analysis
HCI GROUP INC (HCI): Free Stock Analysis
PROASSURANCE CP (PRA): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
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