Triumph Group to Issue $300M Notes - Analyst Blog

Triumph Group Inc. TGI announced it would issue $300 million 5.25% notes due 2022 to refinance its existing debts. The new series of notes will be issued at a price equal to 100% of their face value.

The company will utilize the net proceeds from this issue along with its other existing sources of fund to redeem the outstanding principal amount of its 8.625% senior notes due 2018 and pay related fees and expenses. The 8.625% senior notes of aggregate amount $350 million due 2018 were issued by Triumph Group in 2010.

The issue of senior notes to redeem older notes is a practice very common in the corporate world.  The companies can thus benefit from favorable market conditions and lower the cost of capital.

In most cases a company issues new debts to finance its business ventures or use it for general corporate purposes. A common reason for the issue is to refinance existing debts. In fiscal 2014, Triumph Group issued new debts worth $451 million and redeemed debt and other long-term obligations amounting to $416.7 million.

The company's interest expenses in the fourth quarter of fiscal 2014 were $17.6 million. Interest expenses are expected to come down following the refinancing of the higher interest bearing debts. Management had given such an indication during its fourth quarter fiscal 2014 earnings call. Accordingly, the earnings guidance range for fiscal 2015 was adjusted to take into account the refinancing fees of the notes due 2018.

Fourth quarter fiscal 2014 earnings were higher than the Zacks Consensus Estimate of $1.26 by 10.3%. Triumph Group expects earnings per share for fiscal 2015 in the range of $5.65 to $5.75. The Zacks Consensus Estimate is presently at $5.71 per share, on the higher end of the guided range.

Triumph Group currently has a Zacks Rank #3 (Hold). Investors interested in the aerospace and defense equipment industry may consider stocks like Curtiss-Wright Corporation CW, Ducommun Inc. DCO and HEICO Corporation HEI. All these stocks carry a Zacks Rank #2 (Buy).

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