Griffon Corporation GFF, on Jun 8, announced the pricing of $150 million worth of senior notes due to mature in 2028. Subject to the fulfillment of customary conditions, the private offering of notes is expected to close on Jun 22, 2020.
It is worth mentioning here that the company’s shares lost 2% in the past couple of days. The closing price yesterday was $19.60.
Inside the Headlines
As mentioned, the senior notes offered are similar to the notes that were offered by the company in February this year. The debt instruments will be considered as Griffon’s senior unsecured obligations, while the company’s domestic subsidiaries will guarantee it.
The notes will carry a coupon rate of 5.75%. It has been offered at 100.25% of the principal amount plus interest accrued from Feb 19, 2020. Interest on notes will be paid semi-annually.
The company will use funds raised from the notes offering along with its available cash to reduce its debts — redemption of $150 million worth of 5.25% senior notes due to expire in 2022. Also, the company intends on using the funds for the payment of expenses and fees as well as accrued interest related to the 2022 notes.
We believe that the offerings of senior notes will increase the company’s debts, and in turn, might inflate its financial obligations and hurt profitability. Exiting second-quarter fiscal 2020 (ended Mar 31, 2020), its long-term debts were at $1,216.2 million, reflecting an increase of 7% from the previous quarter. However, measures to repay existing debts will be a relief.
Zacks Rank, Estimate Trend and Price Performance
Griffon currently carries a Zacks Rank #5 (Strong Sell). The company’s shares have gained 36.4% in the past three months as compared with the industry’s growth of 7.7%.
In the past 60 days, the Zacks Consensus Estimate for its earnings has been lowered by 34.8% to 86 cents per share for fiscal 2020 (ending September 2020) and by 50% to 84 cents per share for fiscal 2021 (ending September 2021).
Griffon Corporation Price and Consensus
Griffon Corporation price-consensus-chart | Griffon Corporation Quote
Some other companies in the industry, which raised funds through debt offerings year to date, include Danaher Corporation DHR, General Electric Company GE and Carlisle Companies Incorporated CSL. While both Danaher and General Electric carry a Zacks Rank #3 (Hold), Carlisle Companies presently has a Zacks Rank #5.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 60 days, earnings estimates for these stocks have been lowered for the current year.
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