Western Union Co. (WU), the provider of money transfer services whose chief financial officer is stepping down, raised $250 million of bonds to help repay debt.
The company sold 3.35 percent notes due May 2019 to yield 200 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The debt is expected to be rated Baa2 by Moody’s Investors Service after it lowered Western Union’s senior unsecured rating one level from Baa1, according to a statement yesterday from the ratings firm.
Western Union’s CFO Scott Scheirman will leave the company on Feb. 28 and step down from his position at year-end, with Raj K. Agrawal, president of Western Union Business Solutions, to serve as interim CFO starting Jan. 1, the Englewood, Colorado-based company said in a Nov. 14 statement.
“We believe capital markets are receptive to deals now,” Daniel Diaz, a Western Union spokesman, wrote in an e-mail. The company plans to use proceeds for general corporate purposes, including debt repayment, he wrote. Western Union has $500 million of 6.5 percent senior unsecured notes maturing in February, Bloomberg data show.
Operating income at the company, which in 2006 abandoned its founding telegraph business, is estimated to have fallen to $1.12 billion this year, the lowest since 2004, Bloomberg data show.
The offering contains a provision that increases the coupon payment should Moody’s or Standard & Poor’s cut Western Union’s rating below investment grade, according to a company filing today. The interest payment will increase by 25 basis points per level per credit grader to as much as 200 basis points.
Western Union last sold debt in August, issuing $250 million of floating-rate, two-year debentures to yield 100 basis points more than the London interbank offered rate, Bloomberg data show.
The company makes money by charging fees on money transfers and through spreads on exchange rates. A customer who wants to send $100 by credit card to Mexico pays a $5 fee in the U.S., according to the company’s website. The recipient in Mexico would get pesos calculated at a rate that gives the company an additional profit.
Western Union ranked 41st out of the 100 largest short interest positions on the New York Stock Exchange as of the Oct. 31 settlement date.
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