Alliance Data Systems Corporation (ADS) issued senior notes worth $400 million. With maturity scheduled in December 2017, these notes carry a coupon of 5.25%.
Interest on the notes will be paid semiannually with the first interest payment scheduled for June, 2013. Alliance Data offered the notes at 99.912% of the face value to yield 5.5% if held till maturity.
Alliance Data intends to deploy the proceeds from the issuance to finance the acquisition of Hyper Marketing group of companies as well as for corporate purposes.
With this new issuance, the company’s liquidity increased to $2.1 billion. However, there was no material effect on the debt equity ratio. Alliance Data ended the third quarter of 2012 with a debt equity ratio of 83.2%, improving substantially from 92.5% at 2011 end.
The new issuance would require Alliance Data to dish out $21 million annually in interest. Nevertheless, the company’s solid operational performance generates enough funds to service the debt uninterruptedly. Its interest expense in the last quarter escalated 15% year over year.
Alliance Data ended the third quarter with debt of approximately $1.7 billion, reflecting a reduction of $502.9 million in the first nine months of the year.
The last notes issuance by the company dates back to March of this year when it issued $500 million 6.375% senior notes with maturity scheduled for April 1, 2020.
Alliance Data’s operating earnings in the third quarter were 9.3% ahead of the Zacks Consensus Estimate. Results augmented approximately 8.3% year over year and outperformed the guidance of $2.18.
The Zacks Consensus Estimates for the fourth quarter and 2012 are currently pegged at $1.67 per share and $8.17 per share respectively. These estimates translate into year-over-year improvements of 5% and 14%, respectively for the fourth quarter and full year 2012. The Zacks Consensus Estimate for 2012 is shy of company’s guidance of $8.60, which reflects a 13% year-over-year increase.
Alliance Data currently carries a Zacks #3 Rank, translating into a short-term Hold rating. Discover Financial Services (DFS), which competes with the company, carries a Zacks #2 Rank, translating into a short-term Buy rating.
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