HWM
Howmet Aerospace INC
NYSE
8-K: Howmet Aerospace Closes $500 Million Debt Offering, Refinances Existing Notes
Sentiment:
Debt Offering Announcement
22 August 2024 4:10 PM
Howmet Aerospace successfully completed a $500 million debt offering and plans to redeem its 2025 notes, resulting in an expected $21 million reduction in annual interest expense.
Better than expected
The company is expected to reduce its annual interest expense by approximately $21 million due to the refinancing.
Capital raise
Howmet Aerospace has completed a $500 million public offering of 4.850% notes due in 2031.
Summary
- Howmet Aerospace closed a $500 million public offering of 4.850% notes due in 2031.
- The notes were issued under an existing indenture with The Bank of New York Mellon Trust Company, N.A. as trustee.
- The 2031 notes will mature on October 15, 2031, and pay interest semi-annually on April 15 and October 15.
- The company may redeem the notes prior to August 15, 2031, at a price based on the greater of 100% of the principal or a discounted present value calculation.
- After August 15, 2031, the notes are redeemable at 100% of the principal amount plus accrued interest.
- Howmet Aerospace also entered into a cross-currency swap to convert the notes into a Euro liability of approximately 458 million Euros with a fixed interest rate of 3.72% per annum.
- The company plans to redeem all of its outstanding $577.06 million 6.875% notes due in May 2025 on August 23, 2024.
- The redemption of the 2025 notes will be funded by the proceeds from the 2031 notes offering and cash on hand, at an aggregate cost of approximately $594 million, including $12 million in accrued interest.
- These actions are expected to reduce the company's annual interest expense by approximately $21 million.
Sentiment
Score: 7
Explanation: The document is generally positive due to the successful debt offering and expected reduction in interest expense. However, the presence of risk factors and the cost of redeeming the 2025 notes temper the overall sentiment.
Positives
- The company has successfully raised $500 million through a debt offering.
- The refinancing of existing debt is expected to result in a $21 million reduction in annual interest expense.
- The company has secured a lower interest rate on the new debt compared to the debt being refinanced.
- The cross-currency swap provides a hedge against currency fluctuations.
Negatives
- The company will incur approximately $594 million in costs to redeem the 2025 notes, including $12 million in accrued interest.
- The company is taking on additional debt of $500 million.
Risks
- The document includes a list of risk factors that could cause actual results to differ materially from forward-looking statements.
- These risks include deterioration in global economic conditions, adverse changes in markets, cyber attacks, loss of significant customers, manufacturing difficulties, supply chain disruptions, labor disputes, and geopolitical risks.
- The company also faces risks related to legal proceedings, government contracting regulations, and changes in discount rates or investment returns on pension assets.
Future Outlook
The company expects to reduce its annual interest expense by approximately $21 million as a result of the debt offering and refinancing. The company disclaims any obligation to update forward-looking statements.
Industry Context
This debt offering and refinancing is a common strategy for companies to manage their capital structure and take advantage of favorable interest rates. It allows Howmet Aerospace to reduce its borrowing costs and improve its financial flexibility.
Comparison to Industry Standards
- Many aerospace companies utilize debt financing to fund operations and growth initiatives.
- The interest rate of 4.850% on the 2031 notes is within the typical range for corporate debt of similar maturity and credit rating.
- The cross-currency swap is a common tool used by multinational corporations to manage currency risk.
- The refinancing of higher-interest debt with lower-interest debt is a standard practice to improve financial performance.
- Companies like Boeing and Airbus also frequently issue debt to fund their operations and capital expenditures.
Stakeholder Impact
- Shareholders will benefit from the reduced interest expense and improved financial position.
- Creditors will hold new debt with a lower interest rate.
- Employees are not directly impacted by this announcement.
Next Steps
- The company will complete the redemption of the 2025 notes on August 23, 2024.
- The company will make semi-annual interest payments on the 2031 notes starting October 15, 2024.
Key Dates
- 1993-09-30: Date of the original Indenture between Alcoa Inc. and The Bank of New York Mellon Trust Company, N.A.
- 2007-01-25: Date of the First Supplemental Indenture between Alcoa Inc. and the Trustee.
- 2008-07-15: Date of the Second Supplemental Indenture between Alcoa Inc. and the Trustee.
- 2017-12-31: Date of the Fourth Supplemental Indenture among Arconic Inc. and the Trustee.
- 2020-04-16: Date of the Fifth Supplemental Indenture between Howmet Aerospace Inc. and the Trustee.
- 2023-05-23: Date the shelf registration statement was automatically declared effective.
- 2024-08-08: Date of the Underwriting Agreement and Preliminary Prospectus Supplement.
- 2024-08-22: Closing date of the $500 million debt offering and the date of this report.
- 2024-08-23: Expected date for the redemption of the 2025 notes.
- 2031-08-15: Date after which the 2031 notes are redeemable at par.
- 2031-10-15: Maturity date of the 2031 notes.
Keywords
debt offering, notes, refinancing, interest expense, cross-currency swap, redemption, fixed income, capital markets, Howmet Aerospace
HWM
Howmet Aerospace INC
NYSE
Sector: Industrials
Filings with Classifications
Better than expected
1 May 2025 4:42 PM
Quarterly Report
- Sales increased by 6% year-over-year.
- Net income increased significantly from $243 million to $344 million.
- Earnings per share increased from $0.59 to $0.84.
- Segment Adjusted EBITDA increased from $460 million to $580 million.
Better than expected
1 May 2025 7:00 AM
Quarterly Report
- The company reported record first quarter revenue.
- The company reported better than expected adjusted EBITDA.
- The company reported better than expected adjusted EPS.
- The company increased full year guidance.
Better than expected
16 April 2025 4:46 PM
Proxy Statement
- The company's revenue, net income, adjusted EBITDA, and free cash flow all increased year-over-year.
Delay expected
13 February 2025 5:35 PM
Annual Results
- Quality control issues at Boeing have negatively impacted, and are expected to negatively impact, narrow body and wide body production rates in the near term.
- A labor union work stoppage and ensuing production restart at Boeing has negatively impacted results.
Better than expected
13 February 2025 7:05 AM
Earnings Release
- The company exceeded the high end of its previous guidance.
- Revenue, net income, and adjusted EBITDA all showed significant year-over-year growth.
- The company raised its revenue growth guidance for 2025.
Better than expected
6 November 2024 5:42 PM
Quarterly Report
- The company's sales and net income significantly exceeded the previous year's results.
- The company's earnings per share were substantially higher than the previous year.
- The company's Segment Adjusted EBITDA margins improved across multiple segments.
Better than expected
6 November 2024 7:07 AM
Quarterly Report
- The company's results exceeded the high end of guidance for Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted earnings per share.
- The company reported a 11% year-over-year revenue increase, driven by strong commercial aerospace growth.
- Net income and earnings per share showed significant improvement compared to the previous year.
- Adjusted EBITDA and margins increased substantially, indicating improved profitability.
Capital raise
22 August 2024 4:10 PM
Debt Offering Announcement
- Howmet Aerospace has completed a $500 million public offering of 4.850% notes due in 2031.
Better than expected
22 August 2024 4:10 PM
Debt Offering Announcement
- The company is expected to reduce its annual interest expense by approximately $21 million due to the refinancing.
Capital raise
8 August 2024 4:37 PM
Debt Offering Announcement
- Howmet Aerospace is raising $500 million through a debt offering of 4.850% Notes due 2031.
- The proceeds will be used to redeem approximately $577 million of its 6.875% Notes due 2025, with the remainder coming from cash on hand.
Capital raise
8 August 2024 9:25 AM
Debt Offering Announcement
- Howmet Aerospace is proposing an offering of senior notes.
- The proceeds from this offering will be used to redeem existing debt and for general corporate purposes.
Better than expected
30 July 2024 5:18 PM
Quarterly Report
- The company's sales and net income exceeded expectations due to strong demand in the aerospace sector.
- The company's cost of goods sold as a percentage of sales decreased more than expected, contributing to higher profitability.
- The company's debt reduction and refinancing activities resulted in lower interest expenses than anticipated.
Better than expected
30 July 2024 7:05 AM
Quarterly Report
- The company exceeded the high end of guidance on all fronts.
- The company reported record quarterly revenue, adjusted EBITDA, adjusted EBITDA margin, and adjusted earnings per share.
- The company raised full year 2024 guidance above the second quarter beat.
Better than expected
2 May 2024 4:31 PM
Quarterly Report
- The company's net income, sales, and earnings per share all significantly exceeded the prior year's results, indicating better than expected performance.
- The company's Segment Adjusted EBITDA increased across all segments, demonstrating strong operational performance.
- The company's effective tax rate was lower than the prior year, contributing to the improved net income.
Capital raise
2 May 2024 4:31 PM
Quarterly Report
- The company established a commercial paper program under which it may issue unsecured commercial paper notes up to a maximum aggregate face amount of $1,000 million.
- The company is evaluating whether, when, and to what extent it may access capital markets, including any plans to refinance the 5.125% Notes due October 2024 and the 6.875% Notes due May 2025.
Better than expected
2 May 2024 7:05 AM
Quarterly Report
- The company's results exceeded the high end of guidance on all metrics.
- The company achieved record quarterly results in revenue, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted earnings per share.
- The company generated positive free cash flow in the first quarter for the first time.
Capital raise
2 May 2024 7:05 AM
Quarterly Report
- The company established a commercial paper program, under which the Company may issue unsecured commercial paper notes up to a maximum aggregate face value amount of $1 billion outstanding at any time.
Better than expected
8 April 2024 12:59 PM
Proxy Statement
- The company's revenue, net income, adjusted EBITDA, and free cash flow all increased year-over-year.
Capital raise
4 April 2024 4:30 PM
Debt Issuance Announcement
- Howmet Aerospace has established a commercial paper program to issue up to $1 billion in unsecured notes.
- The proceeds from the notes will be used for general corporate purposes.
Better than expected
13 February 2024 5:05 PM
Annual Results
- The company's sales increased by 17% and income before income taxes increased by 61% compared to 2022, indicating better than expected financial performance.
Better than expected
13 February 2024 7:05 AM
Quarterly Report
- The company exceeded the high end of its guidance range for revenue, adjusted EBITDA, adjusted earnings per share, and free cash flow.
- The company reported record net income and cash from operations for the full year 2023.
- The company's revenue growth of 17% year-over-year was strong, driven by a 24% increase in the commercial aerospace sector.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.