New Issue Analysis: Tutor Perini Corporation (TPC) Convertible Senior Notes Due 2021
Hillside Intra-Day Update
June 9, 2016
Jeffrey Alton, CFA
Introduction:
The $125 million convertible note offering is a 144a private offering, with an option for the underwriters to purchase an additional $18.75 million.
TPC is a construction company that operates in three business segments. The buildings segment, which focuses on specialized buildings such as residential, gaming and health care, is the largest with first quarter 2016 revenues of $488 million. The civil segment focuses on infrastructure including highways and subways had revenue of $367 million in the first quarter. The specialty contractors segment constructs building systems such as HVAC, plumbing, electrical and fire protection systems and had revenue of $282 million in the first quarter.
TPC will use the proceeds from the bond to pay down a portion of the outstanding balance under its term loan and revolving credit facility, to pay the fees and expenses related to the offering, and for general corporate purposes.
More about the bond……
Based on initial price talk of 3.50%, up 35%, the HOCS score is 61 overall/ 68 growth/ 47 safety. This score is decent but hardly outstanding for a new issue. The growth score clocks in a relatively high score because of the elevated volatility of the TPC common shares. The safety score is penalized because of the company's high debt ratio and relatively low market cap of just $1.14 billion. In the bond’s favor is a mix of excellent optics and a relatively underrepresented sector.
Though the stock traded as high as $55 per share before the great recession, the stock reached a five year high of $32.52 almost one year ago. The stock then tumbled to a low of $10 on the tail of two huge earnings misses in the summer and fall of 2015. The 31.333 conversion price of the bond means a return to recent highs, but that does not seem out of reach during the five year term of the bond.
More about the credit…..
Tudor Perini works on big projects such as the construction of new platforms and track under New York's Grand Central Station. Tutor Perini is on a roll as new awards for the last quarter stood at $1.8 billion, higher than any quarter in almost three years. Backlog increased 9% during the first quarter to $8.2 billion, the largest since the end of the third quarter in 2008 during the Great Recession. The company recently reiterated full-year guidance for 2016 with revenue expected to be in the range of $5.1 billion to $5.6 billion, and diluted earnings per share of $1.90 to $2.20.
New CFO Gary Smalley has had an immediate impact cleaning up outstanding receivables due the company on overcharges that have piled up on the company's larger projects. The more disciplined approach helped raise EBITDA from approximately $30 million in Q1 2015 to Q2 $53.6 million.
Summary Financials
(LTM Pro Forma) ($MM)
Revenues 4,939
Adj. EBITDA 173
Total Cash 153
Total Debt 4.4x
Sources: Company filings and Hillside Advisors
June 9, 2016
Jeffrey Alton, CFA
Introduction:
The $125 million convertible note offering is a 144a private offering, with an option for the underwriters to purchase an additional $18.75 million.
TPC is a construction company that operates in three business segments. The buildings segment, which focuses on specialized buildings such as residential, gaming and health care, is the largest with first quarter 2016 revenues of $488 million. The civil segment focuses on infrastructure including highways and subways had revenue of $367 million in the first quarter. The specialty contractors segment constructs building systems such as HVAC, plumbing, electrical and fire protection systems and had revenue of $282 million in the first quarter.
TPC will use the proceeds from the bond to pay down a portion of the outstanding balance under its term loan and revolving credit facility, to pay the fees and expenses related to the offering, and for general corporate purposes.
More about the bond……
Based on initial price talk of 3.50%, up 35%, the HOCS score is 61 overall/ 68 growth/ 47 safety. This score is decent but hardly outstanding for a new issue. The growth score clocks in a relatively high score because of the elevated volatility of the TPC common shares. The safety score is penalized because of the company's high debt ratio and relatively low market cap of just $1.14 billion. In the bond’s favor is a mix of excellent optics and a relatively underrepresented sector.
Though the stock traded as high as $55 per share before the great recession, the stock reached a five year high of $32.52 almost one year ago. The stock then tumbled to a low of $10 on the tail of two huge earnings misses in the summer and fall of 2015. The 31.333 conversion price of the bond means a return to recent highs, but that does not seem out of reach during the five year term of the bond.
More about the credit…..
Tudor Perini works on big projects such as the construction of new platforms and track under New York's Grand Central Station. Tutor Perini is on a roll as new awards for the last quarter stood at $1.8 billion, higher than any quarter in almost three years. Backlog increased 9% during the first quarter to $8.2 billion, the largest since the end of the third quarter in 2008 during the Great Recession. The company recently reiterated full-year guidance for 2016 with revenue expected to be in the range of $5.1 billion to $5.6 billion, and diluted earnings per share of $1.90 to $2.20.
New CFO Gary Smalley has had an immediate impact cleaning up outstanding receivables due the company on overcharges that have piled up on the company's larger projects. The more disciplined approach helped raise EBITDA from approximately $30 million in Q1 2015 to Q2 $53.6 million.
Summary Financials
(LTM Pro Forma) ($MM)
Revenues 4,939
Adj. EBITDA 173
Total Cash 153
Total Debt 4.4x
Sources: Company filings and Hillside Advisors
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