Hello,
In a nutshell, this company has taken a beating and now has a poor credit rating and IMO maybe looking or already thinking about bankruptcy.
What happened
Under Armour (NYSE: UA) (NYSE: UAA) opened lower today (May 21st), with both share classes down around 8% in early trading, after the company announced a convertible senior note offering. Both stocks have since recovered and are now in the green as of 12:45 p.m. EDT.
So what
The athletic apparel maker is proposing a $400 million offering for convertible senior notes that will come due in 2024. The paper will be offered to qualified institutional buyers, and those investors will have an option to purchase up to $60 million more in aggregate. The terms, such as conversion rate and interest rate, have not yet been finalized and will be determined by negotiations with investors.
Under Armour will enter into capped call transactions that will mitigate potential dilution from any conversions, and the consumer discretionary company says it plans to use most of the proceeds to pay off the outstanding debt that it currently has under a revolver.
Now what
In response, credit rating agency Moody's also downgraded Under Armour's corporate family rating from Ba2 to Ba3, about three notches into junk territory. Analyst Mike Zuccaro commented, "Widespread temporary store closures and weaker discretionary consumer spending will result in significant incremental pressures on Under Armour's revenue, profitability and cash flow in 2020."
Good Luck
Cheers!
Be sure to follow, like and check out my profile page for more trade ideas!
In a nutshell, this company has taken a beating and now has a poor credit rating and IMO maybe looking or already thinking about bankruptcy.
What happened
Under Armour (NYSE: UA) (NYSE: UAA) opened lower today (May 21st), with both share classes down around 8% in early trading, after the company announced a convertible senior note offering. Both stocks have since recovered and are now in the green as of 12:45 p.m. EDT.
So what
The athletic apparel maker is proposing a $400 million offering for convertible senior notes that will come due in 2024. The paper will be offered to qualified institutional buyers, and those investors will have an option to purchase up to $60 million more in aggregate. The terms, such as conversion rate and interest rate, have not yet been finalized and will be determined by negotiations with investors.
Under Armour will enter into capped call transactions that will mitigate potential dilution from any conversions, and the consumer discretionary company says it plans to use most of the proceeds to pay off the outstanding debt that it currently has under a revolver.
Now what
In response, credit rating agency Moody's also downgraded Under Armour's corporate family rating from Ba2 to Ba3, about three notches into junk territory. Analyst Mike Zuccaro commented, "Widespread temporary store closures and weaker discretionary consumer spending will result in significant incremental pressures on Under Armour's revenue, profitability and cash flow in 2020."
Good Luck
Cheers!
Be sure to follow, like and check out my profile page for more trade ideas!
