The Western Union Co. (WU), a leader in global money transfer and payment services, announced that it has closed $250 million of debt offering by selling senior unsecured notes. The notes carry a coupon interest of 6.2%, maturing in 2040.
The proceeds from the issue of notes will be used for general corporate purposes, including funding a part of Western Union’s 5.4% senior unsecured notes, which are slated to retire in November 2011.
The notes issue was managed by Bank of America Merrill Lynch a unit of Bank of America Corp. (BAC), Barclays and Wells Fargo Securities, a part of Wells Fargo & Co. (WFC).
The notes carry a rating of “A3″ by Moody’s and “A-” by both Standard & Poor and Fitch. All the ratings are investment grade level, signifying low default risk.
During March, Western Union entered into a debt modification transaction whereby it exchanged $303.7 million of aggregate principal amount of its 2011 notes by issuing new notes due April 1, 2020.
Western Union keeps issuing notes from time to time. Last year during February, the company issued $500 million of 6.50% notes due 2014. The proceeds were used to repay a 364-day term loan facility.
Since the company’s spin-off from First Data in 2006, its interest coverage ratio has averaged around 7.5:1. The decline in the ratio from previous levels was due to debt acquired in connection with the spin-off. Since then, debt levels have stood at approximately $3 billion. The debt-to-capital ratio as of March 31, 2010 was 89.0%.
However, it is to be noted that Western Union stands solid with $1.2 billion of cash generated from operations in 2009. It has generated an annual free cash flow of over $1 billion for the past three years. Sitting on a cash balance of $1.5 billion at the end of March 31, 2010, the company has adequate financial flexibility.
For 2010, management expects cash flow from operations in the range of $800 – $900 million.
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