HOUSTON – Forum Energy Technologies, Inc. (NYSE: FET), a global manufacturing company serving the oil, gas, industrial, and renewable energy industries, has launched a private offering of $100 million in senior secured bonds. The five-year bonds are part of a strategic move to manage the company’s debt by redeeming all outstanding 9.000% Convertible Senior Secured Notes due in 2025 and repaying borrowings under the seller term loan related to the acquisition of Variperm Energy Services.
The offering is backstopped, which typically indicates that the issuer has arranged for a party to purchase any unsubscribed shares. However, the securities have not been registered under the Securities Act of 1933 or any state securities laws, and will only be available to non-U.S. persons outside the United States under Regulation S of the Securities Act.
FET has clarified that this announcement is not a notice of redemption for the 2025 Notes nor a notice of repayment for the Seller Term Loan. The press release also specifies that the securities may not be sold in any state where such an offer, solicitation, or sale would be unlawful and is not an offer to sell or a solicitation of an offer to buy any securities.
This financial maneuver comes as part of FET’s broader efforts to streamline its financial structure and reduce higher-interest debt. The company’s strategy includes the use of net proceeds from the bond offering along with available cash to address its current debt obligations.
The information regarding this offering is based on a press release statement from Forum Energy Technologies. The company, headquartered in Houston, Texas, emphasizes its commitment to enhancing safety, efficiency, and environmental sustainability in its operations.
Investors are cautioned that statements in the press release that are not historical facts, but rather are forward-looking, involve risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected or implied in those statements. Forum Energy Technologies has not provided any guidance on the potential outcome of the offering or its impact on the company’s financial position.
In other recent news, Forum Energy Technologies (FET) has displayed a strong performance in the second quarter of 2024, exceeding free cash flow expectations and subsequently raising its full-year guidance. FET is making strides in improving its balance sheet, redeeming a substantial portion of its 2025 notes and aiming to retire the remaining balance within the year. The company’s growth strategy, which encompasses new product development and expanding its international market presence, has led to a significant increase in sales outside the U.S., now accounting for half of total sales.
Despite projections of a subdued U.S. market, FET’s capital-light business model and operational efficiency have contributed to an upward revision of the free cash flow forecast. The company is also exploring options to refinance its debt, accelerating its plan to return cash to shareholders. These developments are part of FET’s recent activities.
The Variperm acquisition has contributed to an increase in EBITDA and margins, despite a decline in segment EBITDA due to lower revenue and an unfavorable product mix. Analysts from Neal Lux have discussed potential revenue synergies from recent acquisitions and the unchanged outlook for oil sands development. In addition, Lyle Williams has expressed optimism about the Middle East and offshore markets, noting increased subsea wellhead orders.
InvestingPro Insights
Forum Energy Technologies’ recent move to launch a $100 million senior secured bond offering aligns with its current financial position and market valuation. According to InvestingPro data, FET’s market capitalization stands at $187.82 million, indicating that this bond offering represents a significant financial maneuver relative to the company’s size.
The company’s revenue for the last twelve months as of Q2 2023 was $772.06 million, with a quarterly revenue growth of 10.66% in Q2 2023. This growth trajectory suggests that FET is actively seeking to optimize its capital structure to support ongoing operations and potential expansion.
An InvestingPro Tip highlights that FET’s earnings have been volatile in recent years. This volatility may explain the company’s strategic decision to refinance its debt, potentially seeking more favorable terms to stabilize its financial position. The bond offering could provide FET with improved financial flexibility, especially considering its negative P/E ratio of -11.2, which indicates recent profitability challenges.
Another relevant InvestingPro Tip notes that FET is trading at a low Price to Book ratio of 0.42. This suggests that the market is valuing the company below its book value, which could be a factor in the company’s decision to raise capital through bonds rather than equity.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could provide a deeper understanding of FET’s financial strategy and market position.
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