Griffon Corporation GFF yesterday announced the closing of a private offering of $150 million worth of senior notes due to mature on Mar 1, 2028. Notably, the offering — at 100.25% of the principal amount plus interest accrued from Feb 19, 2020 — was made by the company on Jun 8.
It is worth mentioning here that the company’s shares gained 2% yesterday, with the trading closing at $18.18.
Inside the Headlines
The senior notes offered were similar to the notes that were offered by Griffon in February this year. The debt instruments are now the company’s senior unsecured obligations and are guaranteed by its domestic subsidiaries.
The coupon rate of the notes is 5.75%, which will be paid semi-annually on Mar 1 and Sep 1. The first interest payment will be due on Sep 1, 2020.
The company intends to use the net proceeds of $145.4 million raised from the offering along with its available cash to reduce its debts via 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.
Notably, the issuer has the option to redeem the senior notes before Mar 1, 2023, for a consideration equal to the principal amount (100%) plus premium and interest (accrued and unpaid), if applicable. The redemption price of the notes will be 105.75% of principal value and interest, only if the company opts for redeeming 40% of its notes outstanding as well as pay redemption price from proceeds of equity offerings to the public and complete redemption with 3 months of such equity offering.
Further, the notes can be redeemed on or after Mar 1, 2023, for a value equal to 102.875% of principal value and accrued interest. Notably, the redemption price will be equal to 100% of principal value and accrued interest for any redemption done on or after Mar 1, 2026.
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 #4 (Sell). The company’s shares have gained 59.5% in the past three months as compared with the industry’s growth of 19.1%.
In the past 60 days, the Zacks Consensus Estimate for its earnings has been lowered by 4.4% to 86 cents per share for fiscal 2020 (ending September 2020) and by 4.5% 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 Carlisle Companies carry a Zacks Rank #3 (Hold), General Electric presently has a Zacks Rank #4.
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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