Discover to replace senior notes
The financial services company unveils an exchange offer for two series of debt.
By Zacks Equity Research
Discover Financial Services (DFS) has announced an offer to exchange its outstanding 10.25% senior notes, due 2019, and 6.45% senior notes, due 2017, with new senior notes, due 2022. The old notes have an outstanding principal of $400 million, a portion of which will be reimbursed in cash.
The new notes will be issued for a minimum aggregate principal value of $250 million. Moreover, the 10.25% senior notes will get priority during replacement. While all of the 10.25% notes will be replaced, the 6.45% notes will only be exchanged if the principal value of the new notes, issued in place of the 10.25% notes, does not exceed $250 million.
Further, the 6.45% notes will be replaced on a pro-rata basis to the extent that the aggregate principal value of the new notes, issued in replacement of both types of old notes, reaches $250 million. Additionally, the 6.45% notes will only be replaced for a maximum of $50 million principal value of the new notes.
The exchange offer is only open to qualified institutional buyers and people who are not "U.S. persons," as defined in the Securities Act of 1933. Moreover, if the non-U.S. person is a resident of a member state of the European Economic Area, covered by Directive 2003/71/EC, then that person should be a qualified investor, as defined in the Prospectus Directive.
The exchange offer is valid till May 4. However, holders of old notes, who apply for the exchange offer and do not withdraw their tender before April 20, will receive an early exchange premium of $50 per $1000 principal value. Additionally, valid tenders cannot be withdrawn after April 20.
Discover holds the right to extend the date of the exchange offer as well as the withdrawal deadline. Additionally, the company will not register the new notes under the Securities Act or any state securities laws.
Currently, Discover carries a Zacks No. 2 Rank, which translates into a short-term "buy" rating. We maintain our long-term "outperform" recommendation on the stock.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The Fed may start tapering in just a few months. Here are a few of the likely winners and losers.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.