TD Ameritrade's Debt Draws Eager Buyers

Updated to include company's confirmation of the terms of the debt sale, latest share price.

NEW YORK (TheStreet) -- TD Ameritrade's(AMTD) new debt offering drew a strong response from institutional investors on Friday.

The company filed the prospectus to sell the debt with the Securities and Exchange Commission on Thursday, saying it plans to use the proceeds to pay down its existing senior debt, which totaled about $1.4 billion as of Sept. 30. Today it confirmed reports that it had sold $1.25 billion worth of bonds. The deal broke down to $250 million worth of 2.95% senior unsecured notes due 2012; $500 million worth of 4.15% senior unsecured notes due 2014; and $500 million worth of 5.6% senior unsecured notes due 2019.

TD Ameritrade CEO Fred Tomczyk said in a press release he believes the notes offering will result in "a more flexible capital structure" for the company.

In its coverage earlier in the day, Dow Jones cited a syndicate person working on the deal as saying orders for the paper surpassed $3 billion.

While the refinancing in and of itself doesn't remove any hurdles that stood in the way of a deal in the past, the eager institutional interest to the debt sale could embolden TD Ameritrade to make a much-discussed play for E*Trade Financial(ETFC).

The offering's success removes really the only concern about TD Ameritrade's balance sheet expressed by Moody's Investors Service when it boosted its issuer and senior secured ratings for the company's debt on Nov. 16. The agency cited better operating performance and credit metrics for the move, and said then that it expected Omaha, Neb.-based TD Ameritrade to address its "concentrated debt maturity profile" in due course, referring to the fact that most of the company's long-term debt was carried on a term loan maturing in December 2012.

Fitch Ratings also lifted its ratings on the company's debt this week, and said it anticipated a refinancing was in the offing as well. In its press release accompanying the upgrade, Fitch made reference to a potential acquisition, saying it expects the company's leverage would trend higher if it made a deal, but that it believes TD Ameritrade would keep this in mind when structuring the transaction. The agency said the company's debt-to-EBITDA [earnings before interest, amortization, depreciation and amortization] ratio stood at 1.16X as of Sept. 30.