Virtu Financial (VIRT) Offers $1.8 Billion Senior Secured Term Loan – January 14, 2022

Virtu Financial, is (VIRT Free Report) the Subsidiaries recently announced pricing for a $1.8 billion Senior Secured Term Loan (the “Term Loan”). The term loan is issued at 99.75% of face value and matures in 2029.

With the proceeds generated from the term loan, Virtu Financial plans to repay its existing senior secured term loan as part of efforts to refinance its existing credit facilities. The proceeds are intended to fund share buybacks and to meet general corporate expenses.

Although the Fed has signaled three interest rate hikes in 2022 (published on CNBC), a low rate environment currently prevails. By issuing the term loan in the current scenario, Virtu Financial can source funds and increase its financial flexibility. This, in turn, reinforces VIRT’s efforts to reduce interest charges, which can otherwise weigh on margins.

Virtu Financial appears to have succeeded in this endeavor as interest expense on long-term borrowings decreased by 11.8% in the first nine months of 2021 compared to the comparable period a year earlier.

Sufficient cash reserves and adequate cash generation capabilities position VIRT well to ensure the uninterrupted service of its short-term obligations. Strong cash flow can be used to pursue growth-related initiatives, prudent capital deployment and debt repayment, thereby ensuring the solvency of the stock. Continued efforts to repay debts have paid off as the company’s long-term debt level appears to be on a downward trend. As of September 30, 2021, the same decrease of 2.1% compared to the figure at the end of 2020.

It is imperative to mention that the solvency position of Virtu Financial looks impressive. VIRT’s cash balance ($683.8 million) as of September 30, 2021 remains well above short-term borrowings of $312.8 million.

Virtu Financial’s debt ratio has improved. This is supported by VIRT’s total debt to total capital of 47.1% at the end of the third quarter. Although the same figure deteriorated by 20 basis points (bps) compared to the end of 2020 figure, it is still below the industry figure of 48.8%.

Similar to Virtu Financial’s move, other financial stocks like Jefferies Financial Group Inc. (I F free report), MoneyGram International, Inc. (MGI free report) and Euronet Worldwide, Inc. (EFT Free Report) have also issued senior notes or term loans to reduce the debt burden.

As of August 31, 2021, Jefferies Financial includes $993.8 million of senior notes (5.50% senior notes due 2023 and 6.625% senior notes due 2043). JEF’s leverage ratio is improving, with total debt to total capital of 50.1% at the end of the third quarter improving by 170 basis points compared to the end of 2020.

MoneyGram holds a $400 million 5.00% term loan due 2026 and $415 million 5.38% senior secured notes due 2026 as of September 30, 2021. The ratio MGI’s debt ratio stood at 130.2% at the end of the third quarter, which improved by 800 basis points. of the figure at the end of 2020.

As of September 30, 2021, Euronet includes a total of senior notes worth $694.9 million. EEFT’s leverage ratio of 44.6% at the end of the third quarter improved by 530 basis points compared to the figure at the end of 2020.

Shares of Virtu Financial gained 20.8% year-on-year, versus 17.2% for the sector.

Image source: Zacks Investment Research

VIRT currently has a Zacks rank of #4 (sell).

You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While shares of Jefferies Financial and MoneyGram have gained 45.5% and 7.4% respectively in one year, Euronet shares have lost 9.1% in the same period.

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