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SWK Offers Equity Units & Debentures

Payal Jalan

In two separate announcements yesterday, industrial tool maker Stanley Black & Decker Inc. (SWK) announced its intention to sell Equity Units and priced fixed-to-floating rate debentures. Net proceeds generated from the offering will be used by the company for general corporate purposes.

Stanley Black & Decker’s Equity Units offering will comprise of $300 million principal amount of junior subordinated notes due 2018 and $300 million worth of common shares to be offered through purchase contracts. Delivery of common stock will depend on purchase contract settlement in Nov 2016.

Stanley Black & Decker intends to issue as many as 3,000,000 Equity Units or roughly 3,450,000 Units in the event of over-allotment option exercised in full by the underwriters.

Besides the Equity Units offering, Stanley Black & Decker has priced $400 million worth of Fixed-to-Floating Junior Subordinated Debentures. The debentures, offered under the company’s universal shelf registration statement filed with the U.S. Securities and Exchange Commission has been offered at 100.0% of the principal amount. The offering will consummate on Dec 3, 2013.    

The Debentures are due to mature on Dec 15, 2053 and carry an interest rate of 5.75% per annum during the fixed-rate period. Interest will be paid semi-annually on Jun 15 and Dec 15. The first interest installment will be paid on Jun 15, 2014. During the floating-rate period, interest will be three-month LIBOR+4.304% and will be paid quarterly beginning from Mar 15, 2019.

Stanley Black & Decker’s debentures issuance has been rated ‘BBB’ by Fitch Ratings while ratings of ‘Baa2’ and ‘BBB+’ are expected from Moody's Investors Service and Standard & Poor's, respectively.

The twin offerings of Stanley Black & Decker will increase the company’s debt balances that in turn will increase its financial obligations. Long-term debt, net of current maturities, is anticipated to increase 20.6% from the balance at the end of third quarter 2013. Earnings to Fixed Charges ratio of 5.1x for the nine months ended Sep 28, 2013 will get a further boost after the issuances announced are completed. This ratio was 4.4x for year 2012.

Stanley Black & Decker currently has $12.5 billion market capitalization and carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the Industrial Products sector include NSK Ltd. (NPSKY), NN Inc. (NNBR) and Norsk Hydro ASA (NHYDY). NSK Ltd. and NN Inc carry Zacks Rank #1 (Strong Buy) while Norsk Hydro is rated Zacks Rank #2 (Buy).

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