Timken Prices €600 Million Senior Notes Due in 2034

Rhea-AI Summary

The Timken Company (NYSE: TKR) has announced the pricing of €600 million in 4.125% senior unsecured notes due in 2034, to be issued at 98.832% of par. The offering, managed by Goldman Sachs & Co. and J.P. Morgan Securities plc, is expected to close on May 23, 2024, subject to customary conditions. Timken plans to use the proceeds to redeem its 3.875% senior notes due 2024, repay borrowings under its senior unsecured revolving credit facility, and cover other corporate purposes. Timken, a global leader in engineered bearings and industrial motion, reported $4.8 billion in sales in 2023.

Positive

• Pricing of €600 million in senior notes indicates strong investor confidence.
• Interest rate of 4.125% on the notes is competitive.
• Proceeds will be used to redeem existing 3.875% notes, reducing near-term debt obligations.
• Repayment of borrowings under senior unsecured revolving credit facility will enhance financial flexibility.
• Timken posted $4.8 billion in sales in 2023, reflecting robust performance.
• Recognition as one of the World's Most Innovative Companies and other accolades enhance corporate reputation.

Negative

• Notes issued below par at 98.832%, slightly reducing potential proceeds.
• Increasing long-term debt obligations with new 10-year notes.
• Redemption of 2024 notes and repayment of borrowings could indicate liquidity management concerns.
• 4.125% interest rate is higher than the 3.875% of the redeemed notes, potentially increasing interest expenses.

Insights

Financial Analyst

The Timken Company's announcement regarding the €600 million senior notes issuance carries significant weight for stakeholders. By issuing these 4.125% senior unsecured notes due in 2034 at 98.832% of par, Timken aims to refinance existing debt, specifically the 3.875% senior notes maturing in 2024. This strategy highlights a few key points:

Debt Refinancing: Refinancing at a slightly higher interest rate (4.125% vs. 3.875%) suggests Timken is willing to incur higher costs over the long term, possibly indicating confidence in its future cash flows and creditworthiness. However, it's a moderate increase which might not significantly affect the company’s financial stability.

Debt Maturity Extension: Extending debt maturity to 2034 provides Timken with more time to manage its financial obligations and potentially invest in growth opportunities without immediate repayment pressure.

Use of Proceeds: The allocation of proceeds to redeem existing notes and repay revolving credit borrowings enhances Timken's financial flexibility. This choice suggests a cautious approach to managing liquidity and leveraging opportunities for corporate growth.

Retail investors should note that this move can stabilize Timken's short-term liquidity while extending debt obligations. Over the long term, higher interest payments might affect profitability, but the commitment to debt management signifies a strategic approach to sustaining financial health.

Market Research Analyst

The issuance of €600 million in senior notes by The Timken Company has several implications from a market perspective. Firstly, Timken’s ability to attract substantial investment through this offering underscores investor confidence in the company's stability and growth trajectory. Being priced at 98.832% of par indicates strong demand, albeit with minor discounts reflecting current market conditions.

(1) Investor Confidence: The successful pricing and expected close of this offering suggest that market participants are confident in Timken’s future prospects and financial health.

(2) Interest Rate Environment: Issuing notes at 4.125% ties into the broader interest rate environment, which has seen rates gradually rising. This could reflect expectations of ongoing inflationary pressures and central bank policies.

(3) Strategic Positioning: By refinancing existing debt and addressing short-term credit obligations, Timken positions itself strategically for sustained stability and growth. It's a signal of prudent fiscal management and foresight in navigating future financial landscapes.

In summary, this move can be seen as a positive signal of Timken's commitment to maintaining a healthy balance sheet and furthering its market position amidst evolving economic conditions.

NORTH CANTON, Ohio, May 16, 2024 /PRNewswire/ -- The Timken Company (NYSE: TKR), a global technology leader in engineered bearings and industrial motion, today announced the pricing of €600 million aggregate principal amount of 4.125% senior unsecured notes due in 2034 (the "Notes") in an underwritten public offering. The Notes will be issued at 98.832% of par, and the offering is expected to close on or about May 23, 2024, subject to the satisfaction of customary closing conditions.

Goldman Sachs & Co. LLC and J.P. Morgan Securities plc are serving as joint book-running managers for the offering.

Timken intends to use the net proceeds from the offering of the Notes to (1) redeem all of its outstanding 3.875% Senior Notes due 2024 (the "2024 Notes"), including any related fees and expenses, and (2) repay borrowings outstanding under its senior unsecured revolving credit facility. Timken intends to use any remaining net proceeds to repay borrowings under its accounts receivable facility or for general corporate purposes.

The Notes are being offered pursuant to an effective shelf registration statement that has previously been filed with the Securities and Exchange Commission (the "SEC"). The offering will be made solely by means of a prospectus supplement and accompanying prospectus (together, the "Prospectus") filed with the SEC. You may obtain these documents without charge from the SEC at www.sec.gov. Alternatively, you may request copies of these documents by calling Goldman Sachs & Co. LLC toll free at +1-866-471-2526 or J.P. Morgan Securities plc toll free at +44-20 7134-2468 (non-U.S. investors), or J.P. Morgan Securities LLC collect at +1-212-834-4533 (U.S. investors).

This release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor will there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale is not permitted.

About The Timken Company

The Timken Company (NYSE: TKR), a global technology leader in engineered bearings and industrial motion, designs a growing portfolio of next-generation products for diverse industries. For 125 years, Timken has used its specialized expertise to innovate and create customer-centric solutions that increase reliability and efficiency. Timken posted $4.8 billion in sales in 2023 and employs more than 19,000 people globally, operating from 45 countries. Timken is one of the World's Most Innovative Companies, according to Fast Company, and has been recognized among America's Most Responsible Companies and America's Greatest Workplaces for Diversity by Newsweek, the World's Most Ethical Companies® by Ethisphere and America's Most Innovative Companies by Fortune.

Safe Harbor

Certain statements in this release that are not historical in nature are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the company's beliefs, plans and expectations, are forward-looking statements. Such statements are based on the company's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Forward-looking statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "will," "estimate," "would," "target" and similar expressions, as well as variations or negatives of these words. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the risks and uncertainties related to market conditions and satisfaction of customary closing conditions related to the closing of the offering of the Notes and the risks and uncertainties described in the Prospectus. For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to the company's filings with the SEC, including the company's Annual Report on Form 10-K for the year ended December 31, 2023, quarterly reports on Form 10-Q and current reports on Form 8-K. Except as required by the federal securities laws, the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Prohibition of sales to retail investors in the European Economic Area.

The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area ("EEA"). For these purposes, (i) the expression "retail investor" means a person who is one (or more) of: (A) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or (B) a customer within the meaning of Directive (EU) 2016/97 (as amended, the "Insurance Distribution Directive"), where  that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (C) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended, the "Prospectus Regulation"); and (ii) the expression "offer" includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes. Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation") for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

Prohibition of sales to retail investors in the United Kingdom.

The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom ("UK"). For these purposes, (i) the expression "retail investor" means a person who is one (or more) of: (A) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (the "EUWA"); (B) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (as amended, the "FSMA") and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of UK domestic law by virtue of the EUWA; or (C) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129 as it forms part of UK domestic law by virtue of the EUWA (the "UK Prospectus Regulation"); and (ii) the expression "offer" includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes. Consequently no key information document required by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the "UK PRIIPs Regulation") for offering or selling the Notes or otherwise making them available to retail investors in the UK has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.

This communication is only being distributed to, and is only directed at, (i) persons who are outside the UK, (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this communication or any of its contents.

Media Relations:
Scott Schroeder 234.262.6420
scott.schroeder@timken.com

Investor Relations:
Neil Frohnapple 234.262.2310
investors@timken.com

 

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SOURCE The Timken Company

FAQ

What is the value of the senior notes Timken is issuing in 2024?

Timken is issuing €600 million in senior unsecured notes.

What is the interest rate on Timken's new senior notes due 2034?

The interest rate on Timken's new senior notes is 4.125%.

When is the closing date for Timken's senior notes offering?

The closing date for the offering is expected to be on or about May 23, 2024.

What will Timken use the proceeds from the senior notes offering for?

Timken will use the proceeds to redeem its 3.875% senior notes due 2024, repay borrowings under its senior unsecured revolving credit facility, and for general corporate purposes.

What was Timken's reported sales figure for 2023?

Timken reported $4.8 billion in sales for 2023.