Proceeds from the planned private placement of senior second-lien secured notes will be used in part to help support the businesses of some 100 broker-dealer clients Penson hopes to absorb in its Ridge purchase
Penson Worldwide Inc., whose pending acquisition of Broadridge Financial Solutions Inc.’s Ridge Clearing and Outsourcing Solutions Inc. unit will make it the second-biggest correspondent-clearing firm, said late Tuesday that it will issue about $200 million of notes in a private placement.
The firm also said its first-quarter profit will range between $100,000 and $200,000, or about one cent a diluted share.
Proceeds from the planned private placement of senior second-lien secured notes will be used to pay down about $100 million of bank debt and provide working capital to help support the businesses of some 100 broker-dealer clients Penson hopes to absorb in the Ridge transaction. The new debt supplements $60 million in five-year, 8% senior convertible notes that Penson recently raised.
The firm, which earlier had indicated that it would be issuing more debt, also recently expanded its bank credit agreement to $100 million, from $70 million.
In announcing preliminary results for its first quarter, Penson estimated net income of $100,000 to $200,000, or a penny a share, on about $67.5 million of net revenue. In the comparable first quarter of 2009, Penson had earnings of $.07 a share.
Excluding about $1.3 million of pretax expenses related to buying the Ridge contracts and severance payments, Penson said net income for the first quarter was closer to $900,000, or about $.04 a diluted share. The consensus estimate of five analysts, excluding the one-time expenses, was $.06 a share.
Last month, Penson chief executive Philip Pendergraft signaled to analysts that first-quarter results would be pressured, and also said that the firm had lowered its estimate of revenue from Ridge clients to between $50 million and $60 million, from an earlier estimate of $75 million. In recent weeks, Neuberger Berman Group LLC — one of Ridge’s biggest clients — said it was jumping to a rival clearing firm, while regulators closed down GunnAllen Financial Inc., another of that firm’s clients.
Shares of Penson, which rose five cents to $10.42 in Nasdaq trading Tuesday, were unchanged in after-hours trading following the announcement. In the last year, the shares have ranged between a low of $7.33 and a high of $12.23.
