CenterPoint Energy, the Houston, Texas-based electric and gas utility, saw its shares decline in premarket trading after unveiling plans for a convertible bond offering.
The company's stock fell 2.7% to $41.85 on Monday morning as it announced a private placement of $550 million in convertible bonds due May 2029. CenterPoint said the net proceeds from the sale will be used for general corporate purposes, specifically citing the repayment of commercial paper and other debt obligations.
The financing comes on the heels of a strong finish for the stock last week. Shares rose 0.8% on Friday to close at a record $43, placing the company’s market capitalization at roughly $28 billion.
CenterPoint also reported an increase in fourth-quarter profit earlier last week and disclosed a larger 10-year capital plan. The company tied the capital plan increase to continued growth in electricity demand, noting that demand trends have supported an expanded investment outlook.
Implications and context
The private placement of convertible bonds provides CenterPoint with a source of capital that management intends to allocate to short-term liquidity needs and debt management. Using proceeds to repay commercial paper and other debt can affect the company’s near-term balance-sheet composition while preserving cash for operations and planned investments under its updated capital plan.
Investors reacted to the offering with a pullback in the premarket session, reversing some of last week’s gains that produced a record closing price.
What the company disclosed
- Offering size: $550 million in convertible bonds.
- Maturity: May 2029.
- Placement: Private placement.
- Use of proceeds: General corporate purposes, including repayment of commercial paper and other debt.
Financial performance note
Earlier last week CenterPoint reported an increase in fourth-quarter profit and said it had raised its 10-year capital plan, citing rising electricity demand as a factor behind expanded investment expectations.