Delphi Financial Group Inc. (DFG), a provider of integrated employee benefit services, yesterday announced an early redemption of $20 million in 8.00% senior notes due 2033. The redemption date is set for July 14, 2010.
 
The outstanding principal amount of the notes would be $118.8 million after the redemption. The redemption is being done at par value plus accrued interest to − but not including − the redemption date.
 
The notes were originally issued in May 2003 in the aggregate principal amount of $125 million. The proceeds were used to repay $120.8 million of debt obligation.
 
Delphi’s partial redemption denotes the latest measure in its longstanding financial strategy to de-lever balance sheet and strengthen capital structure. At the end of March, the company had a debt-to-capital ratio of 20%, no short-term debt and a comfortable $112 million of holding company financial resources.
 
Estimates Revision
 
Over the last 30 days, one of the 9 analysts covering the stock has lowered estimates for the second quarter of 2010, while no upward revisions were witnessed. Currently, the Zacks Consensus Estimate for the second quarter is operating earnings of 84 cents per share, down 23.24% from the year-ago quarter.
 
The absence of upward estimate revisions for the second quarter indicates a likelihood of downward pressure on the performance of the stock in the near term.
 
With respect to earnings surprises, the stock has been almost steady over the last four quarters, with three positive surprises. The average remained positive at 15.06%. This implies that Delphi has surpassed the Zacks Consensus Estimate by 15.06% over that period.
 
The downside potential for the first-quarter estimate, essentially a proxy for future earnings surprises, currently stands at 7.14% for Delphi.
 
Delphi issues and redeems its debt from time to time in an effort to improve its capital structure, reduce financing cost and streamline its debt maturity profile. Recently, in January, the company issued $250 million in 10 year senior unsecured notes, using the proceeds to retire debt of $222 million.
 
Delphi competes with Conesco Inc. (CNO), StanCorpFinancial Group Inc. (SFG) and American Equity Investment Life Holding Co. (AEL).
Read the full analyst report on “DFG”
Read the full analyst report on “CNO”
Read the full analyst report on “SFG”
Read the full analyst report on “AEL”
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