Wendy's Shares Fall After News Of Note Offering

NEW YORK (AP) — Shares of fast food chain Wendy's/Arby's Group Inc. dropped Thursday after the company said it will sell $500 million in senior unsecured notes due in 2016 and use the proceeds to repay debt.

Shares fell 20 cents, or 5 percent, to $3.80 in morning trading.

After the market closed Wednesday, the company announced the private offering and said it will use the money to prepay about $125 million in borrowings outstanding under its senior secured term loan. Some of the money will also go to Wendy's/Arby's Group for general corporate purposes, including funding growth initiatives and returning capital to shareholders in the form of stock buybacks or dividends.

CL King & Associates analyst Michael W. Gallo said in a note to investors that a share buyback would be the most likely use for the proceeds not used to pay back loans.

Gallo estimated that if all the remaining proceeds were used to buy back shares, Wendy's could repurchase about 20 percent of the shares outstanding.

He also said he believes the company's management is attempting to "opportunistically take advantage of a favorable interest rate environment."