Kemper (KMPR) Offers 2.400% $400M Senior Unsecured Notes
Kemper Corporation KMPR announced the pricing of $400 million aggregate principal amount of senior unsecured notes. The notes carry an interest rate of 2.400% and are scheduled to mature on 2030.
The company plans to deploy the net proceeds for general corporate purposes that may include working capital requirements and strategic investments.
Subsequently, Moody's Investors Service assigned a Baa3 rating to the notes.
The company displayed prudence by issuing senior notes amid a low interest rate environment to procure funds and enhance financial flexibility without affecting liquidity. As of Jun 30, 2020, cash balance increased nearly three-fold to $389.3 million from the 2019 end level.
By capitalizing on the low interest rate environment, the company is also attempting to reduce its interest burden, thus facilitating margin expansion. Also, the company’s operational strength should enable it to service debt uninterruptedly, thereby maintaining the stock’s creditworthiness.
However, with the new issuance, interest expense, which increased 9.2% in the first half of 2020, will increase further. But we still believe that the company is in a strong position to clear debts, banking on operational efficiency.
As of Jun 30, 2020, total debt of the company was about $777.7 million, down 0.1% from 2019 end. Debt-to-capital ratio of 15.7 improved 70 basis points. The latest offering will increase the debt-to-equity ratio by 620 basis points.
Kemper boasts a strong balance sheet with significant financial flexibility. As on Jun 30, 2020, the company had $943 million of available committed contingent liquidity and no near-term debt maturities. Its debt-to-capital ratio of 15.7 compares favorably with the industry average of 30.8.
Shares of this Zacks Rank #3 (Hold) multiline insurer have lost 12% year to date compared with the industry’s decline of 30.4%.
Recently, Fidelity National Financial FNF announced the pricing of $600 million aggregate principal amount of senior unsecured notes. The notes carry an interest rate of 2.450% and are scheduled to mature on Mar 15, 2031. American Financial Group AFG issued 4.50% $200 million aggregate principal amount of senior unsecured notes due Sep 16, 2060 while W. R. Berkley Corporation WRB announced the pricing of $170 million aggregate principal amount of senior unsecured notes.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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