EnerSys Completes Offering Of $300M Senior Notes Due 2027

EnerSys (NYSE:ENS) recently announced the completion of offering of senior notes worth $300 million. The notes are due to mature on Dec 15, 2027. The proposal for this private offering of notes was announced by the company on Dec 5.

The senior notes offered, at 100% of the principal amount, are EnerSys’ unsecured obligations and will be guaranteed by those subsidiaries (existing and future) of EnerSys which act as guarantors to the company’s existing 5% senior notes due to expire in 2023 and senior secured credit facilities.

The notes carry 4.375% per annum interest rate, with two semi-annual payments to be made each year on Jun 15 and Dec 15. The first interest payment will be made on Jun 15, 2020.

As noted, the company will have the option to redeem the notes prior to Sep 15, 2027. In this case, price for each note will include 100% of the principal amount, interest (accrued and unpaid) and a “make whole” premium payment. Meanwhile, 100% of the principal amount and interest (accrued and unpaid) payment will be made for each note if redemption is done on or after Sep 15, 2027.

Funds raised from notes offering will be utilized by EnerSys for repayment of borrowings under the existing revolving credit facility.

We believe these offerings of senior notes will increase EnerSys’ debts and in turn, might inflate financial obligations and dampen profitability. However, repayment of debts using the offering proceeds will be a relief.

EnerSys’ Debt Profile

It is worth mentioning here that the company's long-term debt at the end of second-quarter fiscal 2020 (ended Sep 29, 2019) stood at $1,117.8 million. This balance reflects an increase of 86.4% from the year-ago figure.

Further, the company’s interest expenses in the quarter totaled $10.1 million, suggesting a rise of 57.4% from the year-ago quarter.

Zacks Rank, Estimates and Price Performance of EnerSys

The company, with approximately $3.1-billion market capitalization, currently carries a Zacks Rank #3 (Hold). It is poised to benefit from acquired assets and solid products portfolio. However, rising costs and unfavorable movements in foreign currencies remain concerns. Moreover, a highly leveraged balance sheet remains a woe.

In the past 60 days, earnings estimates for EnerSys have moved south. The Zacks Consensus Estimate for earnings is pegged at $5.07 for fiscal 2020 (ending March 2020) and $6.04 for fiscal 2021 (ending March 2021), suggesting a decline of 2.1% and 0.5% from the respective 60-day-ago figures.

Enersys Price and Consensus