Auburn Hills-based automotive supplier BorgWarner Inc (NYSE:BWA). has entered into an agreement to issue $1 billion in senior notes, the company disclosed in a recent Securities and Exchange Commission (SEC) filing. The agreement, dated Tuesday, involves the sale of $500 million in 4.950% senior notes due in 2029 and $500 million in 5.400% senior notes due in 2034.
The notes are being offered under an underwriting agreement with BofA Securities, Inc., Citigroup Global Markets Inc., and Wells Fargo Securities, LLC, representing several underwriters. BorgWarner, a key player in the motor vehicle parts and accessories sector, is expected to use the proceeds from the sale to repurchase its existing 3.375% senior notes due in March 2025 and 5.000% senior notes due in October 2025 through tender offers. Any remaining funds will be allocated for general corporate purposes.
Interest on the new notes will be payable semi-annually, with the 4.950% notes maturing on August 15, 2029, and the 5.400% notes on August 15, 2034. BorgWarner reserves the right to redeem the notes at its discretion before maturity under certain conditions outlined in the indenture, which will be governed by an agreement with Deutsche Bank Trust Company Americas as trustee.
The offering and sale of these senior notes are registered under the Securities Act of 1933, as per the Registration Statement on Form S-3, and are subject to customary events of default as described in the indenture.
In other recent news, BorgWarner Inc. reported strong Q2 financial results despite market challenges, with sales reaching $3.6 billion. The company has announced significant restructuring within its ePropulsion segment, aiming for annual cost savings of around $100 million by 2026. Despite a reduction in total sales projections for 2024, BorgWarner has increased its full-year margin outlook and plans to repurchase $300 million of its stock in the latter half of the year.
The company expects to outperform market production and has secured new product awards across combustion, hybrid, and electric vehicles. BorgWarner anticipates 2024 sales to range from $14.1 billion to $14.4 billion, with a full-year margin outlook of 9.6% to 9.8%.
Despite weaker foreign currencies and a lower market production outlook, BorgWarner is experiencing a 25% year-over-year growth in eProduct sales. Restructuring actions are expected to offset sales declines and provide significant cost savings. These are the recent developments in BorgWarner's financial performance and strategic initiatives.
InvestingPro Insights
As BorgWarner Inc. takes strategic steps to manage its debt portfolio and invest in its future, current financial metrics provide a glimpse into the company's health and potential. The automotive supplier has a market capitalization of $7.29 billion and an attractive price-to-earnings (P/E) ratio of 10.35, which improves to 8.01 when adjusted for the last twelve months as of Q2 2024. This suggests that the company is potentially undervalued based on earnings.
From a profitability standpoint, BorgWarner has remained profitable over the last twelve months, with a gross profit margin of 18.41% and operating income margin of 8.81%. While these figures indicate some pressure on margins, the company's cash flows have been robust enough to cover interest payments, which is a positive sign for investors considering the new issuance of senior notes.
InvestingPro Tips highlight that BorgWarner has maintained dividend payments for 12 consecutive years, demonstrating a commitment to returning value to shareholders. Furthermore, with liquid assets exceeding short-term obligations, the company appears to be in a solid position to meet its short-term liabilities. For investors seeking more comprehensive analyses, additional tips are available on InvestingPro, including insights on shareholder yield and predictions from analysts on the company's profitability for the year.
For those interested in exploring further, there are 7 additional InvestingPro Tips on BorgWarner Inc. available at Investing.com/pro/BWA, offering deeper insights into the company's financial nuances and future outlook.
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