Penson to issue debt to support Broadridge deal

Penson Worldwide Inc., whose pending acquisition of Ridge Clearing and Outsourcing Solutions Inc. will make it the second-biggest correspondent-clearing firm, said last week that it will issue about $200 million of notes in a private placement.
The firm also said that its first-quarter profit will range between $100,000 and $200,000, or about a penny a diluted share, compared with 7 cents a year earlier.
Proceeds from the planned private placement of senior second-lien secured notes will be used to pay down about $100 million of bank debt and provide working capital to help support the businesses of some 100 broker-dealer clients that Penson hopes to absorb in the Ridge transaction. The new debt supplements $60 million in five-year, 8% senior convertible notes that Penson recently raised.
The firm, which earlier had indicated that it would be issuing more debt, also recently expanded its bank credit agreement to $100 million, from $70 million.
In announcing preliminary results for its first quarter, Penson estimated revenue of about $67.5 million.
Excluding about $1.3 million of pretax expenses related to buying the Ridge contracts and severance payments from Broadridge Financial Solutions Inc., Penson said that net income for the first quarter was closer to $900,000, or about 4 cents a diluted share. The consensus estimate of five analysts, excluding the one-time expenses, was 6 cents
a share.
Last month, Penson chief executive Philip Pendergraft signaled to analysts that first-quarter results would be pressured, and also said that the firm had lowered its estimate of revenue from Ridge clients to between $50 million and $60 million, from an earlier estimate of $75 million. Recently, Neuberger Berman Group LLC — one of Ridge’s biggest clients — said it was jumping to a rival clearing firm, while regulators closed down Gunn-
Allen Financial Inc., another Ridge client.
E-mail Jed Horowitz at [email protected].