In a process to restructure its debts, TECO Energy Inc. (TE) announced that its subsidiary Tampa Electric Company will issue 5.10% notes due in 2021 and swap it with its outstanding $250 million of 6.875% senior notes due in 2012 and $400 million of 6.375% senior notes due in 2012.
The exchange offer is valid through December 8, 2010; however, Tampa Electric has also fixed an early exchange date of November 22, 2010, for swapping the notes. Existing holders of the notes, who tender their notes on or before the early exchange date, will be eligible for an additional early exchange premium.
Tampa Electric’s exchange offer is subject to certain conditions; one among them is that the company will not receive any cash proceeds from this exchange offer. The exchange offer will only be distributed to holders of Existing Notes who complete and return a letter of eligibility.
Interest charges of TECO Energy during the third quarter 2010 increased marginally to $57.4 million from $57.3 million in the year-ago quarter owing to higher long-term debt levels. We expect the swapping of debts would bring down the interest expense going forward.
The adjusted earnings of TECO Energy at the end of third-quarter 2010 were 34 cents per share compared with 40 cents per share in the year-ago comparable period. The Zacks Consensus Estimates for fourth quarter fiscal 2010, fiscal year 2010 and fiscal year 2011 are 24 cents per share, $1.31 per share and $1.41 per share, respectively.
TECO Energy competes head-to-head with NextEra Energy Inc. (NEE), Progress Energy Inc. (PGN) and Southern Company (SO). In the trailing twelve months, the gross margin of the company fared better than its peers.
TECO Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-tern Neutral rating on the stock.
Tampa Electric Company is a regulated wholly owned subsidiary of TECO Energy and has both electric and gas operations.
Based in Tampa, Florida, TECO Energy is involved in the generation, purchase, transmission, distribution, and sale of electric energy in Florida.
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