Aetna Issues $750M in Notes - Analyst Blog

Aetna Inc. (AET), one of leading U.S. health care providers, yesterday announced the offering of 10-year notes amounting to $750 million. The size of the issue was originally $500 million.

The proceeds from the issue will be used to retire commercial paper and for general corporate purpose. Aetna had $697 million of commercial paper outstanding as of June 30, 2010.

The notes, which are denominated as senior notes, carry a rating of “Baa1” from Moody’s Investors Service, a subsidiary of Moody’s Corp. (MCO) and “A-” from both Standard & Poor’s and Fitch. Interest at the rate of 3.95% will be payable on the notes twice a year.

Barclays Capital, The Royal Bank of Scotland (RBS) and UBS (UBS) were the joint bookrunning managers for the sale. Prior to this, in September 2008, Aetna had issued $500 million of 10-year notes to repay outstanding commercial paper.

Currently, Aetna’s leverage ratio (debt to capital) stands at 28.3%, in line with the company’s target of 30%. The company has a strong balance sheet. It has maintained a strong cash generation trend for several years now. At the end of second quarter 2010, the company had $1.40 billion of cash and cash equivalents, up 17% from the year end 2009.

With a fairly strong cash position, the company follows a liberal share repurchase program to reward its shareholders. In 2009 and 2008, the company repurchased approximately 29 million and 43 million shares at a cost of approximately $773 million and $1.8 billion, respectively.

During the quarter, Aetna repurchased 7.2 million shares. We expect the company to maintain its trend of cash flow generation and share buyback through the rest of 2010, thus helping the bottom-line earnings.
 
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