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Lear Prices $500 Million Notes

Zacks Equity Research

Lear Corp. (LEA) declared the pricing of senior unsecured notes worth $500 million due in Jan 15, 2023 with a coupon of 4.75%. The sale of the notes is expected to close on Jan 17, 2013, subject to customary closing conditions.

The offering will be made to qualified institutional buyers in the U.S. according to Rule 144A under the Securities Act of 1933. Outside the U.S. the offerings will be made in accordance with Regulation S of the Securities Act of 1933.

The proceeds from this offering together with other liquidity sources of the company will be utilized to purchase $70 million worth of existing notes in 2013 together with investments in additional component capabilities and emerging markets. It will also be used for share repurchase under the common stock share repurchase program and for general corporate purposes.

Standard & Poor's Ratings Services has raised its corporate credit rating on Lear to 'BB+' from 'BB' and assigned 'BB' rating to Lear’s proposed $500 million senior unsecured debt offering. The rating agency also assigned 'BBB' and '1' recovery rating on the company's senior secured revolving credit facility. The rating service has a stable outlook based on the improved free cash flow of the company.

Lear posted a 19% increase in adjusted earnings per share to $1.29 in the third quarter of 2012 from $1.23 earned in the corresponding quarter last year. The profits surpassed the Zacks Consensus Estimate by 9 cents per share. In absolute terms, profits improved 11.3% to $127.2 million compared with $114.3 million in the year-ago quarter.

Revenues increased by 2% to $3.5 billion in the reported quarter, due to 2% increase in global industry production, partially offset by depressing business condition in Europe. Production in Europe declined 7% during the quarter.

Lear Corporation designs, manufactures, assembles, and supplies automotive seat systems, electrical distribution systems, and related components primarily to automotive original equipment manufacturers. The company sells its products chiefly in North America, South America, Europe, and Asia.

The company competes with Johnson Controls Inc. (JCI). Currently, it retains a Zacks Rank #3 (Hold).

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