TAMPA - In its latest move to cut debt, TECO Energy Inc. said Thursday it netted about $129-million by issuing 11-million shares of its common stock to funds managed by Franklin Advisers Inc.
The sale, completed Wednesday, will lend a boost to TECO's troubled financial position, but at the cost of further diluting the Tampa utility's already-battered share price and earnings per share.
The new shares represent about a 6 percent increase in TECO's total shares outstanding, which now stand at 187.5-million. More than 49-million of those shares, or 26 percent, have been issued since October 2001. The cash-strapped company has issued securities and slashed its dividend by nearly half to cope with its financially draining exposure to weak electricity markets where it has built new wholesale power plants.
TECO said the new shares will be sold to three funds managed by Franklin Advisers of San Mateo, Calif., at $11.76 a share, a 4 percent discount off its Sept. 9 closing price of $12.25. The Tampa utility said it expects to use the proceeds to pay off short-term debt and for general corporate purposes.
According to a TECO filing with the Securities and Exchange Commission, most of the shares were sold to two of Franklin's retail mutual funds. Franklin Income Fund bought 9.8-million TECO shares, and Franklin Utilities Fund purchased 1-million shares. Franklin Income Securities Fund, a fund open only to insurance companies, picked up the remaining 200,000 shares.
Lisa Gallegos, a spokeswoman for Franklin Advisers parent Franklin Templeton Investments, said the company doesn't comment on stock purchases made by its funds.
Lehman Brothers analyst Dan Ford said in a research note that TECO appeared to be trying to stave off a potential debt-rating downgrade by Standard & Poor's.
Ford cut his 2003 earnings per share estimate for TECO by a penny to $1.14 and lowered his 2004 estimate by three cents to 77 cents. TECO posted net income of $2.15 a share in 2002.
In a statement Thursday, S&P said its ratings wouldn't be affected by the stock sale, which the ratings agency said was favorable for the company's credit quality. But S&P added that "the equity issuance does not provide enough clarity regarding the future state of TECO Energy's business and financial profile."
Mark Luftig, a utility industry expert and portfolio manager for Jersey City, N.J., money management company W.H. Reaves & Co. said TECO's stock sale and its recent management changes indicated that it is moving in the right direction. He said he also expects the company to sell non-core assets, such as TECO Transport.
W.H. Reaves, which had held more than a million shares of TECO stock a year ago, has completely liquidated its position, Luftig said. "We're looking for an opportunity to buy it back," he said. "We'd just like to see a little more certainty."
TECO's shares closed Thursday at $13.07, up 71 cents, or 5.7 percent, as investors who had been "shorting" the stock - selling borrowed shares betting it would fall further - appeared to be buying back shares to minimize their losses.
-Louis Hau can be reached at firstname.lastname@example.org or 813 226-3404.