AES Corp (AES) Prices $500M Senior Notes To Refinance Debts

The AES Corporation (NYSE:AES) completed the previously announced public offering of $500 million principal amount of 5.125% Senior Notes due 2027. The closing of the offering is expected to be carried out on Aug 28, 2017 subject to terms and conditions.

Details of the Announcement

The pricing of the senior notes will enable AES Corp. to use the net proceeds arising out of the offering to fund the tender offer to purchase the company’s outstanding 8.00% senior notes due 2020.

It also intends to use the remainder of the proceeds from this offering after conclusion, toward retiring other outstanding indebtedness and additionally pay off other fees and expenses.

As per an earlier decision, the company previously announced its intention to initiate a tender offer to purchase for cash, up to $217 million of its outstanding 8.00% senior notes due 2020, subject to certain terms, scheduled to expire on Sep 11, 2017.

Factors In Favor

AES Corp. is focused on preserving its financial flexibility by reducing costs. As further step toward this end, the company launched $400 million in cost reduction and revenue enhancement initiatives including overhead reductions, procurement efficiencies and operational improvements. Such initiatives will aid the company achieve its annual savings target by 2020. Moving forward, the company targets additional cost savings through reducing operation and maintenance costs by $100 million through 2018.

Talking about cost reduction initiatives, one of the peers in the same industry, Duke Energy Corporation (NYSE:DUK) , also recently entered into an agreement with Siemens to design and build a new advanced gas combustion turbine to help lower customer costs, promote regional economic growth, increase efficiency and flexibility in operations.

Price Movement

Shares of AES Corp. have underperformed 0.8% in the last 12 months compared with the industry's gain of 3.7%.

Such underperformance can be attributed to global macroeconomic factors that have been a concern for AES Corp. for quite some time now. The company has bore the brunt of macroeconomic factors, such as the devaluation in foreign currencies, increasing unemployment, and higher interest rates and inflation in Brazil causing a pile up in its underperformance.

Zacks Rank

AES Corp. currently carries a Zacks Rank #3 (Hold).

A few better-ranked players from the same space include Algonquin Power & Utilities Corp. (TO:AQN) and CenterPoint Energy, Inc. (NYSE:CNP) . Both companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Algonquin Power & Utilities delivered an average surprise of 34.22% in the trailing four quarters. Its current year 2017 estimates have risen by 8.5% to 51 cents per share in the last 60 days.

CenterPoint Energy delivered an average surprise of 10.34% in the trailing four quarters. Its current year 2017 estimates have risen by 1.6% to $1.31 per share in the last 60 days.

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