Business & Finance
Business and Finance
Business and Finance
Mon, December 6, 2010
Fri, December 3, 2010
Thu, December 2, 2010 American International Group, Moodya?s Corp, MetLife, Tenneco and Nissan
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: American International Group Inc. (NYSE: [ AIG ]), Moodya™s Corp. (NYSE: [ MCO ]), MetLife Inc. (NYSE: [ MET ]), Tenneco Inc. (NYSE: [ TEN ]) and Nissan Motor (OTC: [ NSANY ]).
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Here are highlights from Wednesdaya™s Analyst Blog:
AIG Offers Notes After 2 Years
Moving ahead with its capital restructuring, American International Group Inc. (NYSE: [ AIG ]) finally entered the debt market yesterday, two years after the company was bailed out in 2008, as it intends to vend off $2.0 billion of bonds in two parts. The company has filed a regulatory prospectus for the two-part notes offering. The proceeds from this sale are expected to be utilized for general business purposes, with the approval of the Federal Reserve Bank of New York.
Accordingly, one set of unsecured note offering comprises 3-year notes worth $500 million, due in January 2014, bearing a fixed interest rate of 3.65% and yield of 295 basis points (bps) over the US Treasuries. The other part of the $2.0 billion debt offering consists of 10-year unsecured notes, due in December 2020, and bears a fixed interest rate of 6.4% with a spread of 362.5 bps over the US Treasuries. Both the set of senior unsecured notes carry a rating of aA3a and aA-a by Moodya™s Investor Service of Moodya™s Corp. (NYSE: [ MCO ]) and Standard & Poora™s, respectively, reflecting a stable outlook.
The decision to offer notes is part of AIGa™s plan to raise about $3.5 billion of capital by selling notes and issuing stock in the fourth quarter of 2010 and in the first quarter of 2011, respectively. The last time AIG had issued debt was in August 2008, when the company had vended about $3 billion in 10-year paper. Currently, those bonds carry a yield of 300 bps over 10-year Treasury bonds.
Given the strong and stable credit rating enjoyed by AIG, it is believed that the attractive premium attached to the newly issued bonds is credible and sustainable and will drive the demand for such bonds. However, risk of execution continues to hang around based on the company's credit default swap portfolio, pending asset sales and administrative disturbances within AIG.
Separately, Fortress Investment Group LLC also completed the 80% acquisition of AIGa™s consumer-credit unit, American General Finance Inc. (AGF) for an undisclosed amount. AIG still owns 20% of AGF according to the agreement. Last month, AIG raised about $37 million from the sale of its American Life Insurance Co. unit to MetLife Inc. (NYSE: [ MET ]) and from the initial proceeds offering of its AIA Group Ltd. in Hong Kong.
While AIG is expected to close the recapitalization plan in the first quarter of 2011, it will be able to shed the loan that it owes to the US Federal Reserve and will leave the US Treasury with a 92% stake in the company.
Overall, we believe that given the consideration that AIG has been working vigorously to attain liberation from the US government and to eliminate redundant operations in order to concentrate on its core global life and property-casualty insurance businesses, the company should be able to re-establish its capital and market position although ita™s a long-term story. Hence, the near term outlook remains cautious and conservative given the uncertainty tied to the performance of AIGa™s debt offering in the market.
Tenneco to Support Nissan March
Tenneco Inc. (NYSE: [ TEN ]) announced that it has started supplying emission and ride control systems to Japana™s Nissan Motor (OTC: [ NSANY ]) for its global supermini compact car, March (also known as Micra in some regions including India).
The systems are manufactured in the companya™s Asian operations. They include new manufacturing plants in Chennai and Hosur in India; Guangzhou, China and in Chonburi, Thailand. However, Tenneco has designed and developed the products (including shock absorbers and exhaust systems) in its engineering centers in Asia, Europe and North America.
Tennecoa™s diversified platform mix has helped win significant business. About a third of the companya™s business since 2007 has been established in Brazil, Russia, India, China and Thailand, 80% of which is for small cars.
In the third quarter of the year, Tenneco recorded a profit of $24 million or 39 cents per share (before special items), significantly up from $3 million or 7 cents per share (before special items) in the same quarter of previous year. However, the companya™s profit barely exceeded Zacks Consensus Estimate by a penny during the quarter.
Revenues in the quarter rose 23% to $1.54 billion on the back of higher original equipment (OE) production volumes across all the regions (especially in North America) and strong aftermarket sales globally.
Despite the strong results and global position, Tenneco faces pricing pressure from OEMs. As a result, the company retains a Zacks #3 Rank (Hold) on its stock for the short term (1a"3 months) and we reiterate our 'Neutral' recommendation for the long term (more than 6 months).
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