Entergy Pulls Remarketing Offer (ETR)

Entergy Corporation (NYSE:ETR) was unable to find buyers for $500 million worth of Senior Notes that are a component the company’s 7.625% Equity Units (NYSE:ETRPrA) due February 11, 2011. It has canceled the remarketing period for the notes.

The bad news is that Entergy had reported its fourth quarter earnings including the remarketed shares. Because that didn’t happen, the company will need to include the shares in its per share calculations for 2008, “causing the number of shares to increase compared to the amount reflected in the release.”

The purchase contracts that were part of the equity units require settlement by February 17th, and the holders of the units have a put option at a settlement rate of 0.6598 shares of Entergy’s common stock for each contract. According to the company, on February 17th, “each holder of the Equity Units will purchase from Entergy 0.6598 shares of Entergy common stock per equity unit for $50.00. No holder will be required to make any additional cash payment.” Entergy will issue 6.6 million new shares to make the settlement happen.

Ouch. At the end of October 2008, Entergy had about 189 million shares outstanding, so the share dilution here is about 3.5%. Not awful, but shares are down nearly 2% in early trading.

Paul Ausick
February 12, 2009