In a new report, E*Trade Financial Corp offered to exchange more than $1 billion debt in an effort to stabilize itself due to insufficient capital. This move may signal further debt exchanges in the online brokerage group’s immediate future.
E*Trade Financial Corp made released a statement that discussed its plans that are set for evaluation during its mid-August business meeting. The brokerage hopes to approve an issuance of 365 million common shares in additional debt-exchange offers. It would also increase the authorized shares of common stock. A recent 435-million-share offering increased stocked outstanding by approximately 77% to almost 1 billion shares.
E*Trade’s next goal will be to make an exchange of more than $1 billion of the new 10-year zero-coupon convertible debt. This would cover every one of it 8% senior notes, which are set to mature in 2011. Additionally, a portion of its 12.5% springing lien notes that are set to mature in 2017.
Recently, the company was provided a much-needed lifeline from the major hedge-fund company Citadel Investment Group. It purchased 90.9 million shares through the stock offering, which took Citadel’s stake in E*Trade from 15% to 17%. Citadel has made an agreement with the brokerage company to tender nearly $800 million in long-term trade. This figure includes $200 million in 2011 notes and between $600 million to a $1 billion in 2017 notes. At this time, Citadel owns an overwhelming 70% of E*Trade’s senior level debt.
E*Trade plans to exchange all of its 2011 notes and nearly $310 million of those 2017 notes that are not currently held by Citadel, but on the same payment terms that the hedge-fund company agreed to in its proposal.
Like every company in the current economy, E*Trade is doing what it can to stay viable, which can be a daunting task requiring a serious amount of financial finagling to accomplish.
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