NRG Energy Refinances Debts - Analyst Blog

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Princeton-based NRG Energy Inc. ( NRG ) announced it will issue $990 million, 6.625% unsecured notes due 2023 to refinance its outstanding debts. The company intends to utilize the net proceeds and a portion of its cash balance to repay its debt of $1.09 billion, 7.375% senior notes due 2017. The offer of issuance of 6.625% notes will close effective, September 24, 2012 subject to customary conditions.

Per the terms of the tender offer, the debt holders who provide the necessary consent on and before September 18, 2012 will receive a total consideration of $1,041.25 per $1,000 notes including a premium of $30.00 per $1,000 notes.

The holders providing consent after September 18, 2012 but on or before the expiration of tender offer date will collect $1,011.25 per $1,000 notes without any consent premium. The cash tender offer is expected to expire on October 5, 2012.

The company's debt-to-equity ratio at the end of the second quarter 2012 was 132.7%, up from 127.1% at year-end 2011. However, with completion of the debt refinancing plan, NRG Energy's debt-equity ratio is expected to marginally fall to 131.4%.

The company's cash in hand as of June 30, 2012 was $1.15 billion versus $1.11 billion as of December 31, 2011. Long-term debt and capital leases as of June 30, 2012 were $10.49 billion, up sharply from $8.9 billion at year-end 2011. Interest expenses in the second quarter 2012 were $167 million flat with the year-ago quarter and with the proposed debt refinancing; interest expenses could decline in the upcoming quarters.

NRG Energy often issues notes from time to time to gather funds for expansion projects, repurchase notes or shares and repay debts. Previously on May 2011, the company issued $800 million of senior notes yielding 7.625% senior notes due 2019 and notes worth $1.2 billion yielding 7.875% due 2021 to refinance its $2.4 billion, 7.375% senior notes due on 2016.

The Zacks Consensus Estimates for the third quarter and full year 2012 are currently pegged at 46 cents per share and 97 cents per share, respectively. The company's closest peer is Virginia-based, The AES Corporation ( AES ).

NRG Energy currently maintains a Zacks #3 Rank implying a short-term Hold rating. The company owns and operates one of the country's largest non-utility power generation and retail electricity businesses. With a market capitalization of $5.01 billion, the company presently has 5,193 full time employees.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AES , NRG

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