Mattel Offers Senior Notes - Analyst Blog

Mattel Inc. (MAT) has recently announced its intention to offer $500 million senior notes, $250 million of which will bear an annual interest rate of 4.35% and mature in ten years. The remaining $250 million will carry an interest rate of 6.20% and mature in thirty years. The senior note offering is expected to close by September 28, 2010.

The company plans to use the sale proceeds from the offering to finance outstanding debt maturing in 2011 and for other corporate general purposes.

Banc of America Securities LLC, a part of Bank of America Corporation (BAC) and RBS Securities Inc., a part of Royal Bank of Scotland Group plc (RBS) are acting as the joint book-running managers for the offer.

As of June 30, 2010, long-term debt of the company, excluding the current portion, was $460 million, down from $700 million as of December 31, 2009. As of the same date, cash and cash equivalents of the company stood at $544.9 million versus $1.1 billion at the end of December 31, 2009.

Besides paying down the company’s high-cost debt, the new offering will increase available fund and extend the maturity period of debt.

As of June 30, 2010, Mattel’s consolidated debt-to-EBITDA ratio, as calculated per the terms of the credit agreement, was 0.7 times (compared with a maximum allowed limit of 3.0 times) and the company’s interest coverage ratio was 15.7 times (compared with a minimum requirement of 3.50 times). Moody’s, a major credit rating agency, assigned Baa2 rating to Mattel’s $500 million bond offering. The rating denotes a stable outlook and can be attributed to Mattel’s strong brand, solid market presence and conservative balance sheet.