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Howmet Aerospace Inc. (NYSE:HWM (BMV:HWM)), a global leader in engineered metal products, has successfully closed an offering of $500 million in aggregate principal amount of 4.850% Notes due 2031. The offering, which was finalized on Thursday, is aimed at refinancing existing debt and reducing the company's annual interest expense.
The newly issued 2031 Notes will mature on October 15, 2031, and carry an interest rate of 4.850% per annum, with interest payments due semi-annually. Howmet Aerospace has the option to redeem these notes prior to August 15, 2031, at a price equal to the greater of 100% of the principal amount or a sum calculated based on a specified Treasury Rate plus 15 basis points. From August 15, 2031, the notes can be redeemed at 100% of the principal amount.
The offering was conducted under an existing shelf registration statement and the notes were sold under an Indenture with The Bank of New York Mellon (NYSE:BK) Trust Company, N.A., as trustee. The Indenture dates back to agreements with Alcoa Inc (NYSE:AA)., the company's predecessor, and has been supplemented several times, most recently in 2020.
In conjunction with the offering, Howmet Aerospace entered into a cross-currency swap to convert the 2031 Notes into approximately 458 million Euros, with a fixed interest rate of approximately 3.72%.
The company also announced the completion of the redemption of its 6.875% Notes due May 2025, with the outstanding principal amount of $577,060,000 expected to be redeemed on August 23, 2024. The redemption will be funded through the net proceeds from the 2031 Notes offering and cash on hand, totaling approximately $594 million, inclusive of accrued interest.
These financial maneuvers are expected to reduce Howmet Aerospace's annual interest expense by approximately $21 million. The company's forward-looking statements indicate a strategic approach to managing its debt profile and improving financial flexibility.
In other recent news, Howmet Aerospace has made considerable financial advancements. The company reported a 14% year-over-year increase in revenue and a 27% rise in commercial aerospace revenue. Additionally, Howmet Aerospace ended the quarter with a free cash flow of $342 million and a cash balance of $752 million.
The company has also priced a $500 million public offering of 4.850% Notes due in 2031, planning to use the proceeds to redeem all outstanding principal of its 6.875% Notes due in 2025.
Investment firms BTIG and Truist Securities have recognized Howmet Aerospace's strong performance. BTIG increased its price target on the company's shares to $115.00, while Truist Securities raised its price target to $105. Both firms acknowledged the company's substantial growth, debt reduction, and positive cash generation trajectory.
In line with these developments, Howmet Aerospace plans to increase capital expenditures by $30 million in 2024 and raise its common stock dividend to $0.08 per share. These recent developments reflect a positive outlook for the company, indicating robust growth in the aerospace industry.
InvestingPro Insights
Howmet Aerospace Inc. (NYSE:HWM) has demonstrated a strategic focus on improving its financial position, as evidenced by its recent debt refinancing activities. In light of this, key metrics from InvestingPro show a company that is trading at a high earnings multiple with a P/E Ratio of 42.6, suggesting a strong market belief in its future earnings potential. However, with a PEG Ratio of 0.54 for the last twelve months as of Q2 2024, the company's price-to-earnings growth is relatively low, indicating that its earnings growth may justify the higher P/E ratio.
InvestingPro Tips highlight that Howmet Aerospace has raised its dividend for four consecutive years, reflecting a commitment to returning value to shareholders. Additionally, 18 analysts have revised their earnings upwards for the upcoming period, signaling optimism about the company's financial performance. For investors seeking more in-depth analysis, InvestingPro offers 19 additional tips on Howmet Aerospace, which can be explored for a comprehensive understanding of the company's investment potential.
With a market capitalization of $39.3 billion and a revenue growth of 14.46% over the last twelve months as of Q2 2024, Howmet Aerospace is positioning itself for continued success in the engineered metal products sector. These financial indicators, coupled with the company's strategic debt management, paint a picture of a robust corporate entity focused on growth and shareholder value.
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