Online brokerage E*TRADE Financial Corporation (ETFC) said Wednesday that it will offer $400 million in common stock shares, and swap up to $1 billion of its senior note debt.
The New York City-based company, which is struggling to emerge from mounting loan losses that are tied to ill-fated mortgage investments, will attempt to raise $400 million via a common stock offering, and will exchange $1 billion worth of debt in order to eliminate substantial interest payments tied to the debt.
The complicated debt exchange involves Citadel Investment Group LLC, which is E-trade's primary shareholder, exchanging at least $800 million in debt. Citadel will also purchase either $50 million or $100 million in E-trade shares as part of the stock offering.
Also pursuant to the debt exchange, E-Trade said it will swap all outstanding 8% senior notes due in 2011, and some of its 12.5% notes due 2017, for new convertible debt.
The Bottom Line
Shares of ETFC are off of 52 week highs of $4 a share and way off all-time highs of $58 set in late 1999. The company lost its way when it made a bad bet getting into the mortgage business. The stock has near-term technical support in the $1.15-1.30 price area. If the shares can rebound, we see overhead resistance around the $2.00-2.50 price levels. We do not currently rate this online broker's stock at this time, but we do follow the company very closely.
E*TRADE Financial Corporation (ETFC) does not currently pay a dividend.
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Tom Reese/Paul Rubillo, Dividend.com
