Huntington Ingalls (NYSE:HII) Industries, Inc. (NYSE:HII) has entered into a material definitive agreement by completing a public offering of $1 billion in senior notes, the company disclosed in a recent SEC filing. The offering, which took place today, involved the issuance of two sets of notes: $500 million in 5.353% senior notes due in 2030 and $500 million in 5.749% senior notes due in 2035.
These debt securities, guaranteed by the company's domestic subsidiaries that back its revolving credit facility and potentially by future guarantors, are unsecured senior obligations. They are senior to any potential future subordinated debt and rank equally with other unsubordinated indebtedness. However, they are structurally junior to the liabilities of subsidiaries not involved in the guarantee.
Interest on the 2030 notes will accrue at an annual rate of 5.353%, with semi-annual payments starting July 15, 2025, and the notes maturing on January 15, 2030. Similarly, the 2035 notes will carry an interest rate of 5.749% per annum, with the same semi-annual payment schedule and a maturity date of January 15, 2035.
The notes were issued under an indenture agreement with U.S. Bank Trust Company, National Association as trustee. This agreement imposes certain restrictions on the company and its subsidiaries, limiting their ability to incur secured debt or engage in sale and leaseback transactions, and sets conditions for mergers, consolidations, or asset sales.
In the event of a change of control triggering event, Huntington Ingalls is obligated to offer to repurchase the notes at 101% of the principal amount plus any accrued interest.
The company reserves the right to redeem the notes at any time at the specified make-whole redemption prices, in addition to accrued interest.
The transaction was conducted under an underwriting agreement dated November 13, 2024, with J.P. Morgan Securities LLC, BofA Securities, Inc., and other financial institutions acting as representatives of the underwriters.
In other recent news, Huntington Ingalls Industries reported a decrease in third-quarter earnings for 2024, with earnings per share dropping to $2.56 from $3.70 in the previous year. The company's revenue also saw a 2.4% year-on-year decline to $2.7 billion. Despite these setbacks, Huntington Ingalls announced a significant $9.6 billion contract for amphibious warships, boosting its backlog to $49.4 billion. BofA Securities and TD Cowen have both adjusted their outlook on the company, citing ongoing challenges in shipbuilding execution.
Huntington Ingalls Industries has also been making strides in leadership transitions and contract awards. Kari Wilkinson is set to assume the role of president of the company's Newport News Shipbuilding division from January 1, 2025. Additionally, the company secured a $197 million contract to enhance U.S. Army combat vehicles through its Mission Technologies division.
In response to operational challenges, the company has been focusing on workforce training and supply chain improvements. These recent developments reflect Huntington Ingalls Industries' ongoing efforts to navigate through challenges and secure its position in the defense industry.
InvestingPro Insights
Huntington Ingalls Industries' recent $1 billion senior notes offering comes at a time when the company's financial metrics and market performance offer a mixed picture. According to InvestingPro data, HII's market capitalization stands at $7.69 billion, with a P/E ratio of 11.07, suggesting a relatively low valuation compared to earnings. This is further supported by an InvestingPro Tip indicating that the company is trading at a low P/E ratio relative to near-term earnings growth.
The company's revenue for the last twelve months as of Q3 2024 was $11.71 billion, with a modest growth of 5.58%. However, an InvestingPro Tip notes that HII has raised its dividend for 13 consecutive years, demonstrating a commitment to shareholder returns despite market challenges. The current dividend yield stands at 2.79%, which may be attractive to income-focused investors.
It's worth noting that HII's stock has faced recent headwinds, with the InvestingPro data showing a significant 25.99% decline in the one-month price total return. This aligns with an InvestingPro Tip suggesting the stock is trading near its 52-week low. The recent debt offering could be seen as a strategic move to strengthen the company's financial position during this period of stock underperformance.
Investors considering HII might find value in exploring the additional 11 tips available on InvestingPro, which could provide further insights into the company's financial health and market position.
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