Moving ahead with its debt restructuring strategies, on Tuesday, Wells Fargo & Co. (WFC) sold $1.25 billion of senior notes, according to IFR, a Thomson Reuters service.
Wells Fargo sold these notes at an issue price of $99.875, maturing on Apr 15, 2015. These 5-year non-callable notes are projected to have a spread of 123 basis points over comparable U.S. Treasuries, bearing a fixed interest rate of 3.625% and yield rate of 3.652%. Interest on the notes is payable semi-annually, in equal installments, commencing Oct 15, 2010, settlement being on Mar 30, 2010.
The debt issue carries a rating of “A1″, “AA-“, “AA-” from Moody’s, Standard & Poor’s and Fitch, respectively. Wells Fargo has appointed Wells Fargo Securities as the sole book-running manager for the sale. Although the details and usage of the note issue is not disclosed, we believe it will help supplement the company’s funding for its expansion and growth plan, although additional debt raises concern over the company’s capital leverage.
Recent Notes Activity in the Market
Of late, raising money through note selling has become a common market phenomenon. In Jan 2010, MetLife Inc. (MET) sold note worth $2.5 billion in a two-part sale and prior to that in Sep 2009, the company sold fixed-rate funding agreement-backed notes worth $1 billion the proceeds of which were used for general corporate purposes.
Earlier this month, Wells Fargo’s peer Goldman Sachs Group Inc. (GS) also issued additional debt of $750, increasing the size of its senior note offering from the previously planned issue of $500 million.
Another peer, JPMorgan Chase & Co. (JPM) also sold off $2.75 billion of notes last week. As well, Hartford Financial Services Group Inc. (HIG) announced the pricing of its public offering of $1.1 billion in senior notes in order to acquire funds for the repayment of the $3.4 billion government bailout money and to prepay existing senior debt due in 2010 and 2011.
Earnings Recap
Wells Fargo’s fourth quarter earnings per share of 8 cents came in significantly ahead of the Zacks Consensus Estimate of breakeven, aided by strong growth in revenue and deposits, though offset by higher credit losses. Capital ratios improved significantly in the quarter with the raising of fresh equity.
We think that the company is well positioned compared to its peers as it benefited from a larger share in the mortgage markets after acquiring Wachovia as well as from the demise of some smaller players. However, higher credit losses resulting from a continued deterioration in the housing markets and weak consumer trends will impact earnings in the upcoming quarters.
Read the full analyst report on “WFC”
Read the full analyst report on “MET”
Read the full analyst report on “GS”
Read the full analyst report on “JPM”
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