E*Trade to cut debt by $340 million in restructuring

The new senior notes were priced Monday afternoon at par and will pay investors an annual rate of 4.625 percent, lower than analysts had forecast. The notes that are being retired paid interest of 6.375 percent, meaning E*Trade's interest costs should decline by about $30 million a year.

The debt restructuring cuts the company's outstanding debt by $340 million to a 10-year low of $1 billion.

Executives had publicly forecast they would meet the $1 billion debt goal this year, but none of the 16 Wall Street analysts following E*Trade expected it to have enough cash to redeem debt in the first half of 2015.

E*Trade will have to pay about $70 million to investors as a "make-whole" premium since the notes it is redeeming were not callable until November 2015. It will recognize the loss this quarter.

Regulators enabled the move by removing constraints on E*Trade's cash-rich brokerage to send money to its parent. E*Trade Securities upstreamed about $430 million this quarter, and regulators have allowed the once-crippled E*Trade Bank to send $550 million to the parent since the third quarter of 2013.

E*Trade will combine the net proceeds from its new notes with $432 million now on its balance sheet to redeem its 2019 notes. It used cash in November when it replaced $940 million of senior notes paying 6 percent and 6.75 percent with $540 million of 5.375 percent 10-year senior notes.

The new eight-year issue matures in September 2023, but is callable as of March 15, 2018.

E*Trade also said it received a vote of confidence from its banks, which increased its revolving credit line of $200 million by another $50 million. The company has not drawn on the line, which is now at the limit set by loan covenants, a spokesman said.

Morgan Stanley, Goldman Sachs & Co and JPMorgan Chase & Co are joint book-runners on the new issue. Credit Suisse Group and Wells Fargo & Co are co-managers.

Shares of E*Trade closed up 45 cents, or 1.7 percent at $26.49 on Monday.

(Reporting by Jed Horowitz; Editing by Eric Walsh, Lisa Von Ahn and Lisa Shumaker)