WEX Inc. issues $550 million in senior notes, amends credit agreement

WEX Inc. (NYSE:WEX), a global provider of business payment processing and information management solutions with a market capitalization of $6 billion, announced on Thursday the completion of its upsized offering of $550 million in senior unsecured notes due 2033. According to InvestingPro analysis, the company maintains a solid financial health score of "GOOD" despite carrying a debt-to-equity ratio of 2.99x. The notes, bearing an interest rate of 6.500% per annum, were sold in a private offering exempt from registration under the Securities Act of 1933.

Concurrently, WEX entered into a Seventh Amendment to its existing credit agreement, establishing an incremental tranche of senior secured term loans amounting to $450 million, known as the Incremental Term Loan B-3 Facility.

The net proceeds from both the notes offering and the Incremental Term Loan B-3 Facility, along with cash on hand, are intended to fund a tender offer to purchase up to $750 million of its outstanding common stock, repay approximately $250 million of its senior secured credit facilities, and cover related fees and expenses. This aligns with one of the key InvestingPro observations that management has been aggressively buying back shares, while maintaining a healthy current ratio of 1.02x. Any remaining funds will be directed towards general corporate purposes, which may include further common stock repurchases post-tender offer.

The notes, accompanied by guarantees from subsidiary guarantors, are subordinated to the company’s secured indebtedness and the liabilities of non-guarantor subsidiaries. Interest payments are scheduled semi-annually with the first payment on September 15, 2025, and the notes will mature on March 15, 2033, unless earlier redeemed or repurchased.

The indenture governing the notes includes covenants restricting certain activities of WEX and its subsidiaries, such as creating liens and entering into sale leaseback transactions. It also outlines the company’s options for redeeming the notes before maturity and the requirement to offer repurchase upon a change of control triggering event.

The Incremental Term Loan B-3 Facility, maturing on March 6, 2032, bears interest at SOFR plus 1.75% or alternative benchmarks and spreads. It is prepayable without penalty, except for a 1.00% premium for any "repricing transaction" within six months of the closing date.

Amendments to the credit agreement include an adjustment to the consolidated leverage ratio level for unrestricted payments from 2.75:1.00 to 3.50:1.00. The Incremental Term Loan B-3 Facility is secured by substantially all of the assets of WEX and certain subsidiaries.

The company’s financial services from time to time may involve parties to the amended credit agreement or their affiliates, for which they receive customary fees and commissions.

The information provided is based on a press release statement and reflects the details outlined in the SEC filing by WEX Inc. on March 6, 2025. Despite the stock’s significant decline of 31.5% over the past year, InvestingPro analysis suggests the company is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of WEX among 1,400+ top US stocks.

In other recent news, WEX Inc. announced plans to launch a modified Dutch auction tender offer, aiming to repurchase up to $750 million of its common stock. The tender offer, expected to start on February 26, 2025, will involve buying back shares at a price range of $148 to $170, utilizing debt financing to secure the necessary funds. Additionally, WEX plans to issue $500 million in new senior unsecured notes and a proposed new incremental term loan B facility of $500 million to support the tender offer and manage existing debt. Analysts have been adjusting their outlooks on WEX, with Mizuho (NYSE:MFG) Securities lowering its price target from $215 to $170 but maintaining an Outperform rating. Similarly, Keefe, Bruyette & Woods reduced their price target to $200 from $220, citing revised earnings per share estimates for 2025 and 2026, yet also kept an Outperform rating. In contrast, William Blair downgraded WEX’s stock rating from Outperform to Market Perform, expressing concerns about the company’s competitive edge and capital allocation strategies. They questioned WEX’s decision to increase investment in corporate payments and benefits offerings instead of opting for restructuring. As WEX navigates these developments, stakeholders are advised to review tender offer documents and consult financial advisors.

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