Senior notes offering
On September 22, 2017, Tronox (TROX) announced that it has completed its $450.0 million offering of senior notes due in 2025. The notes carry a coupon rate of 5.75% and will be paid semi-annually. The offer was made to qualified institutional buyers at par. The net proceeds from this offer combined with borrowings from its new credit facilities will be used to redeem the remaining outstanding balance of its $900.0 million senior notes due in 2020 carrying a coupon rate of 6.375%. TROX also paid the remaining outstanding balance of its $1.5 billion senior secured term loan.
The repayment of a higher coupon rate bond and secured term loan is expected to bring down TROX’s interest expense. Its senior vice president and chief financial officer Tim Carlson said, “This refinancing lowers our overall cost of debt, extends our debt portfolio’s weighted average years to maturity, improves our mix of secured and unsecured debt, and provides additional pay down flexibility. We believe we are now well-positioned to not only complete the transformational combination of Tronox and Cristal’s TiO2 business but also, following closing, to rapidly deleverage our balance sheet as a result of the substantial free cash flow we believe our combination will generate.”
TROX’s stock performance for the previous week
TROX stock fell 4.4% and closed at $21.95 for the week ended September 22, 2017. TROX’s peers FMC (FMC), Albemarle (ALB), and Chemours (CC) rose 0.40%, 2.5%, and 2.8%, respectively, for the same period. Despite a substantial loss, TROX was still trading 21.2% above the 100-day moving average price of $18.01, indicating an upward trend in the stock. On a year-to-date basis, the stock has risen 112.9%. It’s trading well above analysts’ estimated target price of $19.50. TROX’s 14-day relative strength index of 54 indicates that the stock is neither overbought nor oversold.
Investors looking to hold TROX indirectly can invest in the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX), which has invested 5.8% of its holdings in Tronox as of September 22, 2017.