Navistar International Corporation (NAV) declared a coupon rate of 4.50% for senior subordinated convertible notes worth $200 million due in 2018. The company also provided an option to buy additional convertible notes worth $30 million to the initial purchasers.
The offering is expected to close on Oct 11, 2013, depending on the customary closing conditions. The offering will be made to qualified institutional buyers in the U.S. according to Rule 144A under the Securities Act.
The 4.5% per annum interest on the notes will be paid semi-annually. The notes can be converted to cash, shares of Navistar common stock, or a combination of both cash and shares of the company in case of certain circumstances. The conversion will take place at the rate of 17.1233 shares of Navistar for $1,000 principal amount of senior subordinated convertible notes. This conversion rate amounts to an initial conversion price of about $58.40 per share of common stock.
Navistar reported third-quarter fiscal 2013 (ended Jul 31, 2013) loss from continued operations of $237 million or $2.94 per share compared with income from continued operations of $80 million or $1.16 per share in the year-ago quarter. Reported loss was also significantly wider than the Zacks Consensus Estimate of a loss of $1.39 per share.
A fall in volumes in the North America truck business, related to Navistar’s transition to SCR-based (Selective Catalytic Reduction) vehicles and overall weakness in the industry primarily hampered profits. However, this was partially offset by lower selling, general and administrative (SG&A) expenses and engineering and product development costs.
Navistar’s revenues declined 125% year over year to $2.86 billion in the quarter, missing the Zacks Consensus Estimate of $2.98 billion. The year-over-year decrease in revenues was due to a 9% decline in industry demand in North America and a fall in truck sales of the company due to its transition to SCR. This was partially offset by higher sales in the engine business in South America.
Warrenville, Ill.-based Navistar manufactures and sells commercial trucks, mid-range diesel engines, buses, military vehicles and chassis for motor homes and step-vans. Currently, the company retains a Zacks Rank #3 (Hold) on its stock.
Some stocks that are performing well in the industry in which Navistar operates include TRW Automotive Holdings Corp. (TRW), Allison Transmission Holdings, Inc. (ALSN) and Denso Corp. (DNZOY). All these are Zacks Rank #1 (Strong Buy) stocks.