FE Tender Offer Oversubscribed - Analyst Blog

FirstEnergy Corp. (FE) stated yesterday that its previously announced tender offer for its Series B Notes due 2011, with coupon rate of 6.45%, is oversubscribed. The company has increased the size of the offer to $1.2 billion from $725 million. The increased cap is to match the $1.253 billion principal amount of the Notes already tendered by holders.

FirstEnergy intends to fund the repurchase either through liquid cash or by delving into its $2.75 billion revolving credit facility from 25 banks. On a pro-rata basis, the company will disburse $1,092.50 to holders of per $1,000 principal amount of Notes who have tendered before the original deadline of midnight Aug 17, 2009. However, holders who have tendered subsequent to that will receive $1,062.50 per $1,000 principal amount of Notes.

FirstEnergy’s move to clean its balance sheet will further strengthen its financial profile. The high dividend yielding (5.04%) company already has a low debt-to-capitalization of 53.6% after the first half of fiscal 2009, compared to the Zacks industry figure of 82.6%.

Akron, Ohio-based FirstEnergy is a diversified energy company involved in the generation, transmission and distribution of electricity, as well as energy management and other energy-related services. Its generation subsidiaries control more than 14,000MW of annualized capacity. The company with its seven utility subsidiaries is the fifth largest investor-owned electric company in the US as per customer headcount of 4.5 million spread over a 36,100-square-mile area of Ohio, Pennsylvania and New Jersey.