FirstEnergy Corp. (NYSE: FE) has announced a significant capital markets transaction, proposing the issuance of $1.8 billion in aggregate principal amount of convertible senior notes due in 2029 and 2031. This offering, detailed in a recent SEC 8-K filing dated June 9, 2025, comes as part of FirstEnergy’s strategic financing plan to optimize its capital structure, reduce debt servicing costs, and support ongoing investment activities. Source document
FirstEnergy intends to offer \(950 million in convertible senior notes due 2029 and \)850 million due 2031, with initial purchasers granted a 13-day option to buy an additional $150 million in each series. The notes will be unsecured, unsubordinated, and convertible at holders’ option subject to conditions. The company plans to settle conversions with cash, common stock, or a combination thereof. Interest will be paid semi-annually. The exact interest rates and conversion prices will be set at pricing.
Proceeds will be used to repurchase up to $1.5 billion of existing 4.00% convertible senior notes due 2026, repay or refinance other indebtedness, and for general corporate purposes. Management holds discretion over the allocation. The transaction is designed to lower borrowing costs and manage maturities efficiently.
As of fiscal year end 2024, FirstEnergy reported total liabilities of approximately \(38.3 billion with \)22.5 billion in long-term debt. The company’s interest expense for 2024 was $1.01 billion. The proposed notes offering would bolster liquidity and provide flexibility ahead of upcoming debt maturities, aligning with FirstEnergy’s target financial metrics and maintaining a long-term debt to capitalization ratio of roughly 64.36% as of 2024.
FirstEnergy’s management noted in mid-2023 the successful issuance of \(1.5 billion in convertible senior notes at a 4% coupon, helping refinance higher cost borrowings exceeding 7%, while also enabling a \)750 million pension plan contribution. This improved their net qualified pension obligation by over 50%, supporting balance sheet strength and credit profiles.
The company highlighted ongoing capital deployments, with $1.2 billion invested in transmission business in 2023, 50% above the previous year, supporting grid reliability and modernization projects. Rate case settlements in various states are providing additional revenue streams to fund infrastructure investments.
FirstEnergy operates in a highly capital-intensive utilities sector, characterized by regulated cash flows and significant debt requirements for infrastructure investments. The current convertible notes offering supports ongoing efforts to optimize debt maturity profiles, reduce interest burdens, and maintain investment-grade credit metrics amidst evolving regulatory and economic conditions.
The focus remains on operational excellence, cost management, and regulatory engagement to enable rate base growth and customer service reliability. The company’s approach aligns with sector trends emphasizing grid modernization, renewable integration, and resilience investments.
This convertible notes offering marks a strategic financial maneuver by FirstEnergy to strengthen its balance sheet, refinance high-cost debt, and sustain growth initiatives in a capital-intensive regulated environment. The company’s prudent capital management and regulatory progress underpin its favorable outlook amid macroeconomic uncertainties and sector transformation.
Tags: FE, FirstEnergy, FY 2025, convertible senior notes, utilities sector, capital structure optimization