Money transfer company Western Union Inc. (WU) yesterday announced that it has started exchanging its outstanding 5.4% notes aggregating $500 million in principal due 2011 with a new issue of notes. The new notes will carry an interest rate of 135 basis points over and above the 10-year Treasury yield, expiring in April 2020.

The exchange offer, which required notes aggregating at least $250 million to be validly tendered, has been met as of Mar 15, 2010, when $279 million of old outstanding notes were tendered for exchange. The transaction is scheduled to expire at 12:00 midnight, New York City time, on March 29, 2010, unless extended.

Since the company’s spin-off from First Data in 2006, the interest coverage ratio has been around 7.5. The decline in the ratio from the previous levels was due to debt acquired in connection with the spin-off. Since then, the debt levels have stood at approximately $3 billion.

Western Union took similar action last year when it issued $500 million aggregate principal amount of 2014 notes to repay the term loan that was scheduled to mature in December 2009.

As of December 31, 2009, Western Union’s senior unsecured debt carried ratings of “A’, “A3” and “A-“ from S&P, Moody’s and Fitch, respectively, with a stable outlook.

Estimate Revision
Over the last 30 days as well as the last 7 days, the stock of Western Union has not experienced any estimate revisions for the first quarter 2010 from the 22 analysts covering the stock. Currently, the Zacks Consensus Estimate for the first quarter is an operating profit of three cents per share, which would be down 6.25% from the year-ago quarter.
The absence of estimate revisions for the first quarter indicates a lack of any clear directional 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 positive surprises. The average remained positive at 6.9%. This implies that Western Union has surpassed the Zacks Consensus Estimate by 6.9% over that period.

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