August 19, 2020
$650mm
Maturity: 7 Years
Structure: NCL
Coupon: 0.125% (0.125% - 0.625% Price Talk)
Premium: 52.5% (47.5% – 52.5% Price Talk)
Effective Premium: Up 150% with Capped Call
Financial Advisor: Matthews South
Bookrunners: Goldman Sachs, JPMorgan, Citi
Use of Proceeds: Capped Call, Share Repurchase, GCP
Repurchase of Extant Notes: Exchanged $301mm (87%) of 2023 Notes for Parity + 0.75 Points
Structure: NCL
Coupon: 0.125% (0.125% - 0.625% Price Talk)
Premium: 52.5% (47.5% – 52.5% Price Talk)
Effective Premium: Up 150% with Capped Call
Financial Advisor: Matthews South
Bookrunners: Goldman Sachs, JPMorgan, Citi
Use of Proceeds: Capped Call, Share Repurchase, GCP
Repurchase of Extant Notes: Exchanged $301mm (87%) of 2023 Notes for Parity + 0.75 Points
$650 Million Convertible Offering + Repurchase of $301 Million Existing Convertibles
Capital Structure Advice
- Advised the company and its board on capital structure to achieve strategic and balance sheet objectives:
- Appropriate leverage levels and cash balance
- Management of deep in-the-money convertible notes due 2023
- Form of capital raise instrument (term loan, bond, convert)
- With 0% Convertible Notes due 2023 trading at ~360 and very likely to convert early, notes had become an unstable source of funding
- Matthews South helped Etsy craft a repurchase of old notes with issuance of new notes, to term out the company’s balance sheet and lead to efficient execution
- Cash and shares mix was flexible to allow existing investors to close their hedge without putting pressure in either direction on stock; additional shares issued relative to expected net share settlement to be repurchased after pricing
- Amended existing capped call to leave outstanding until maturity, to allow company to recognize full value (rather than discounted value due to time value from an unwind)
Convertible and Capped Call Execution
- Terms achieved (0.125% coupon / 52.5% conversion premium) represented the company-friendly end of an aggressive range, and the lowest coupon / highest conversion premium achieved in a 7-year offering in last 5+ years
- Capped call, priced via broad auction, resulted in effective conversion price up 150%
- As expected, given carefully designed balance of hedging activities, stock price reaction was benign (-1.4%)
Additional Deals for Etsy:
- June 2021: $1.0bn Convertible Notes Offering + Capped Call
- September 2019: $650mm Convertible + Capped Call + Share Repurchase
- March 2018: $345mm Convertible + Capped Call + Share Repurchase
