Loews Corporation (L) has priced a public offering of $1 billion aggregate senior notes. Out of this, $500 million carries an interest rate of 2.625% and is scheduled to mature in 2023. The remaining $500 million carries an interest rate of 4.125% and is scheduled to mature in 2043.
Loews intends to use the net proceeds from the issuance for general corporate purposes.
As of Mar 31, 2013, the debt-to-capital ratio for Loews was 0.28x which represented a deterioration of 1 percentage point from 0.27x at 2012 end. With the issuance of the $1 billion debt, the debt-to-capital ratio is expected to deteriorate further by 2 percentage points to approximately 0.30x.
The new issuance would require Loews to pay an annual interest of $33.8 million. Nevertheless, the company’s solid operational performance generates enough funds to service the debt uninterruptedly. Its interest expense in the first quarter of 2013 reduced 2.7% year over year to $108 million which is expected to increase with the issuance of the debt.
Recently, another insurer, Prudential Financial Inc. (PRU) declared that on Jun 15, 2013, it will redeem all of its outstanding 9% junior subordinated notes worth $920 million, which are scheduled to mature in 2068. On the same date, Prudential will pay a redemption price of $25 per $25 note to its shareholders of record as of Jun 15, 2013.
Loews currently carries a Zacks Rank #4 (Sell). Among other stocks, AEGON N.V. (AEG) and Cigna Corp. (CI) carry a favorable Zacks Rank #1 (Strong Buy) and are worth noting.
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