Mar 8, 2023
$220 million Convertible + $33 million Greenshoe
Maturity: 5 Years
Execution Structure: 1 Day Wall Cross Followed by 1 Day Public Marketing
Structure: Provisional Call with Make-Whole in Year 3
Coupon: 1.875% (1.875 - 2.375% marketing range)
Premium: 32.5% (30.0% - 35.0% marketing Range)
Financial Advisor: Matthews South
Active Bookrunners: Goldman Sachs / Jefferies / RBC
Execution Structure: 1 Day Wall Cross Followed by 1 Day Public Marketing
Structure: Provisional Call with Make-Whole in Year 3
Coupon: 1.875% (1.875 - 2.375% marketing range)
Premium: 32.5% (30.0% - 35.0% marketing Range)
Financial Advisor: Matthews South
Active Bookrunners: Goldman Sachs / Jefferies / RBC
$220 million Convertible Offering
Transaction and Process Overview
Structuring
- Matthews South advised Model N on a complicated multi-step transaction: the repurchase of ~80% of the existing 2025 convertible notes and the issuance of a new convertible
- By refinancing the existing convertible, the company was able to term out the debt, reduce interest expense and raise the conversion price significantly
- Model N utilized a wall cross to give outright accounts more time to understand the story while also generating significant interest from existing holders
- The company did not employ a call spread, but repurchased the bonds for cash (as opposed to net-share settlement) to reduce potential dilution
- We helped the company navigate multiple work streams, focusing on optimal structuring, syndicate selection, documentation, accounting / tax implications, pricing and execution of the transaction
Marketing and Pricing
- The convertible priced at the company friendly end of the coupon and mid-point of the conversion premium range
- The company achieved coupon savings of 0.75% and a conversion price that is ~29% greater than its existing bond
- The transaction was executed with no technical selling from hedge funds (i.e., delta neutral), which helped to mitigate stock price pressure during the day of marketing
