DPL Inc. (DPL) purchased $52.4 million principal amount of 8.125% DPL Capital Trust II Capital Securities in a privately negotiated transaction. DPL paid $56.1 million or 7% premium for the buyback.
This transaction will result in annual interest cost savings of approximately $4.2 million for DPL. The remaining principal balance on the Capital Securities of approximately $142.6 million is scheduled to mature on Sep 1, 2031.
DPL had a strong balance sheet among its peers with a low debt-to-capitalization of 56% in the first nine months of fiscal 2009. The company continues to be a strong cash generator with its annual operating cash flow of approximately $363 million during fiscal 2008. The company closed the first nine months of 2009 with cash and cash equivalents of $62.8 million, and a $320 million revolving credit facility. Total debt of approximately $1.4 billion is in the form of fixed rate instruments (Bonds and Notes) with only $297 million of senior notes due in 2011.
Dayton, Ohio-based DPL Inc. sells electricity through its principal subsidiary Dayton Power and Light Company. DPL owns approximately 900MW of natural gas and diesel peaking generation capacity, and 2,800MW of coal-fired generation capacity. DP&L is an electric utility with more than 500,000 residential, commercial, industrial, and governmental customers in its 6,000 square-mile service area in west-central Ohio.
The other subsidiaries of DPL Inc. are DPL Energy, LLC (DPLE) and DPL Energy Resources, Inc. (DPLER). DPLE operates merchant peaking generation facilities and DPLER markets wholesale power generated by the DPL power plants. In fiscal 2009, the company was nominated as one of the 100 most trustworthy companies based on accounting and governance practices by Forbes.
Shares of DPL rose 9 cents to $27.79 on Monday. DPL’s consistent performance across its solid base of stable utility operations, higher rates, regulatory approval for recovery of fuel cost, strong balance sheet, an above industry average dividend yield and a relatively cheap earnings-based valuation support our bullish outlook for DPL. Thus we reiterate our market Outperform recommendation on the stock, which reflects our view that the shares will trade at a premium with its peer companies like PNM Resources Inc. (PNM) and Avista Corporation (AVA).
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