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Howmet Aerospace (HWM) Reshapes Debt, Purchases & Offers Notes

Howmet Aerospace (HWM) restructures its debt profile through the purchase of 6.875% notes due in 2025 and offerings of 3.000% notes due to mature in 2...

This story originally appeared on Zacks

Howmet Aerospace Inc. HWM, on Sep 1, communicated the early outcome of its tender offer for $600 million worth of outstanding notes due to mature in 2025. It also completed the public offering of $700 million worth of notes due in 2029.

Both tender offer and notes offerings were announced by Howmet Aerospace on Aug 18 and are part its debt restructuring actions taken on the day.

The company’s shares have gained 0.44% in the past two days, ending the trading session at $31.89 yesterday.

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Inside the Headlines

The notes to be purchased by Howmet Aerospace carries a coupon rate of 6.875% and represent half of the $1,200 million principal amount of outstanding 2025 notes. The company received valid tenders for $619.2 million worth of notes and, hence, will use a proration factor of 0.96899990 for accepting the offers.

The total consideration of $1,175 will be paid by Howmet Aerospace for every $1,000 principal amount of notes. The consideration includes the early tender premium of $50 applicable for the 2025 notes.

Howmet Aerospace intends on financing the tender offer with the proceeds raised from the $700 million worth notes offering and available cash. The offered notes carry a coupon rate of 3.000% and will mature on Jan 15, 2029. Interest on the notes will be paid semiannually, on Jan 15 and Jul 15. The first interest payment will be made on Jan 15, 2022.

Any unused amount from the offering will likely be used by Howmet Aerospace for funding general corporate purposes.

The above-mentioned moves will enable Howmet Aerospace to strengthen its balance sheet. Notably, it repaid debts totaling $838 million in the first half of 2021, and its long-term debts stood at $4,227 million at the end of second-quarter 2021. It completed an early redemption of 5.87% notes due in 2022 in the last reported quarter. A healthy liquidity position also supports the company’s debt-restructuring actions. Its cash balance was $716 million exiting second-quarter 2021, while its undrawn revolving credit facility was at $1 billion.

Zacks Rank, Share Price Performance and Earnings Estimates

Howmet Aerospace currently has a market capitalization of $13.7 billion and a Zacks Rank #3 (Hold). Solid product offerings, strengthening end markets, cost-saving actions, healthy liquidity and focus on lowering debts are tailwinds for the company. An increase in labor costs and restrictions in the supply chain might be worrying.

In the past three months, the company’s shares have declined 9.4% as compared with the industry’s fall of 1.6%.


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In the past 60 days, the Zacks Consensus Estimate for its earnings is pegged at 26 cents for the third quarter of 2021, reflecting no change from the 60-day-ago figure. Estimates of $1.00 per share for 2021 and $1.55 for 2022 suggest growth of 2% and 1.3% from the respective 60-day-ago figures.

Stocks to Consider

Three better-ranked stocks in the industry are Altair Engineering Inc. ALTR, KBR, Inc. KBR and Quanta Services, Inc. PWR. All the companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for the companies have improved for the current year. Also, earnings surprise for the last reported quarter was 600.00% for Altair Engineering, 20.83% for KBR and 6.00% for Quanta Services.

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