Implied cost‑saving from the early redemption
Lazard’s 3.625 % senior notes have a total principal of $97,027 (≈ $97 mm) and a straight‑line annual coupon of $3.625 % × $97 mm ≈ $3.5 mm.
The redemption is being made on 18 Sep 2025 – roughly 1.5 years (≈ 17.5 months) before the scheduled maturity on 1 Mar 2027.
If the notes were left outstanding, Lazard would have had to pay:
| Period | Coupon (annual) | Pro‑rata for 1.5 y |
|---|---|---|
| 2025‑26 | $3.5 mm | $3.5 mm × 0.5 ≈ $1.75 mm |
| 2026‑27 | $3.5 mm | $3.5 mm × 1 ≈ $3.5 mm |
| Total interest avoided | – | ≈ $5.3 mm |
Thus, by redeeming the notes now, Lazard saves about $5.3 million in interest expense (≈ 2.3 % of the outstanding principal per year over the remaining term).
Implied yield to investors (yield‑to‑call)
Because the notes are being called at par (no premium mentioned), the effective return for a holder who is forced to sell at the call date is lower than the stated 3.625 % coupon. Using a simple yield‑to‑call calculation:
[
\text{Yield‑to‑call} \approx \frac{\text{Coupon × t}}{1 + \text{Coupon × t}/2}
]
where t = 1.5 years:
[
\text{Yield‑to‑call} \approx \frac{3.625\% × 1.5}{1 + (3.625\% × 1.5)/2}
\approx \frac{5.44\%}{1.027}
\approx 5.3\% \text{ total over 1.5 y}
]
Annualising this gives an effective annual yield of roughly 2.3 %, well below the 3.625 % yield that would have been earned to maturity.
Trading implications
- Credit‑risk neutral: The call removes the 2026‑27 coupon‑stream, so any long‑duration holders (e.g., fixed‑income funds) will see a modest downgrade in yield.
- Short‑position opportunity: If the market had priced the notes at a yield higher than 3.625 % (e.g., 4 %+) before the call, the redemption will force a “pull‑to‑par” that can be captured by shorting the note‑related bond or by selling the equity exposure to Lazard, which will now have a modest cost‑saving boost to earnings.
- Actionable view: Anticipate a small upside in Lazard’s equity on the back‑of‑the‑envelope cost‑saving ($5.3 mm) and a downward pressure on the note‑price if it had been trading at a discount. Consider a short‑duration bond position or a buy‑the‑dip in LAZ stock if the market over‑reacts to the call, as the net impact on cash‑flow is positive but limited.