Leggett & Platt issues $200 million in bonds

Investors who purchase the bonds receive a 5 percent return annually and get their original investment back at maturity, according to David DeSonier, the corporation’s vice president for investor relations. Meanwhile, the issuance allows Leggett & Platt to borrow investor money while long-term interest rates remain low.

According to DeSonier, the publicly traded Leggett & Platt wanted to accumulate cash. With low long-term rates, it decided to issue debt rather than increase its outstanding stock.

DeSonier said the corporation will use the cash for internal growth and external acquisitions, increasing stock dividends or repurchasing some of its 195 million outstanding shares of stock.

“There’s lots of little things (planned),” DeSonier said, “but not one big thing.”

Steve Brooks, Great Southern Investments financial adviser, said short-term rates have risen faster than long-term rates, so Leggett & Platt can borrow money now before long-term rates catch up.

“It would be a good time to issue some debt,” Brooks said.

Prime rate, the rate banks charge borrowers with top credit, is 6.5 percent, and 10-year U.S. Treasury Bonds are currently yielding 4.17 percent, Brooks said.

Leggett & Platt’s latest bond offering marks the fourth such action in two years. The other debt offerings ranged from $150 million to $200 million.

The 122-year–old firm now has $730 million in long-term debt with a weighted average remaining life of 9.8 years and weighted average coupon rate of 4.7 percent.

Weighted averages are used to account for the different proportions of the four debt offerings.

“We are very well situated with over $700 million in long-term debt at historically low interest rates,” DeSonier said.

Before issuing the new debt, starting in early 2003, DeSonier said Leggett & Platt only had $5 million to $10 million in long-term debt.

DeSonier said Leggett & Platt used $350 million of its current long-term debt to repay mature debt in February. That leaves $380 million in cash that the company can use.

Leggett & Platt (LEG) has been publicly traded since 1967. Shares closed Aug. 24 at $24.92, $5.76 below its 52-week high and 34 cents above its 52-week low.

Leggett & Platt employs 33,000 at 300 facilities in more than 20 countries.