Southwestern Upsizes Secondary Offering to Buy Back Debt

Early Wednesday morning, Southwestern Energy Co. (NYSE: SWN) announced an underwritten secondary offering of 75 million shares that would be sold by the underwriters through negotiated transactions, at negotiated prices, or at prevailing market prices. Two hours later the company upsized the offering to 86 million shares.

At the higher level gross proceeds are expected to reach $1.1 billion, not including the underwriters’ 30-day option on an additional 12.9 million shares. The offering is expected to close July 5.

According to the filing:

The net proceeds from the offering will be used to repay $375.0 million of the $750.0 million term loan Southwestern Energy entered into in November 2015 …  and the remaining net proceeds of the offering, together with cash on hand, to fund Southwestern Energy’s tender offers (the “Tender Offers”) to purchase for cash, subject to certain conditions, up to $750.0 million aggregate purchase price, excluding accrued interest, of its 3.30% senior notes due 2018, 7.50% senior notes due 2018 and 4.05% senior notes due 2020.

If the tender offers are not consummated Southwestern may use the proceeds to pay down more of the $750 million term loan, to fund completion of wells already drilled, or to fund other capital projects.

Southwestern was hit hard by low natural gas prices earlier this year. Now, the situation is not so bad according to Wells Fargo Securities:

While recognizing equity dilution to current shareholders can’t feel great, SWN’s balance sheet and liquidity much better positioned than a week ago. [Southwestern] should be able to fund any spending shortfall for next 2-3 years [with leftover cash from the offering].

Credit Suisse Securities, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Mizuho Securities USA Inc. are acting as joint book-running managers for the offering.

Current shareholders are not amused. Shares traded down about 6.5% in the late morning at $13.00, after closing Tuesday at $13.89. The stock’s 52-week range is $5.00 to $22.84.

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