Matthews South

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March 8, 2018
$300mm + $45mm Shoe
Offering Type: 144A
Execution Structure: Overnight Bought Deal
Maturity: 5 Years
Coupon (Fixed): 0.00%
Premium (Fixed): 37.5%
Effective Premium: 100% with Capped Call
Matthews South Role: Financial Advisor
Bookrunners: Goldman Sachs, JPMorgan, Morgan Stanley

$300 Million Convertible Offering + Repurchase of $42 Million of Common Stock

Transaction and Process Overview

Structuring

  • Matthews South helped the company evaluate various bank proposals on both economics and structure of convertible and call spread
  • Recommended pursuing an overnight bought deal structure given the current favorable market dynamics – no stock price risk and known terms prior to launch
  • Introduced novel language into capped call document to improve issuer leverage vs. banks in future unwind scenarios

Designed Bid Process to Optimize Terms

  • Designed and managed bid process on both the convertible and capped call
  • Obtained prices on several different structures so the company could optimize price and structural objectives
  • Terms achieved through the convertible bid were 50bps better than the company friendly end of the proposed marketing ranges – 0% up 37.5% represents the best terms for a zero coupon bond in 2017-2018

Cost Reduction

  • Banks earned net fees of 1.5%, a 1.0% savings relative to typical fees of 2.5% for marketed deals of this size
  • The security traded at par in the aftermarket confirming that Etsy achieved efficient pricing

Strong Market Reaction

  • Attractive mix of outright and hedge investors; and strong stock price reaction in light of favorable terms

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