Matthews South

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May 2, 2019
$125 million Convertible + 15% Shoe
Offering Type: 144A
Execution Structure: 1 Day Marketed
Maturity: 5 Years
Structure: NC3PC@130% w/m/w
Coupon: 1.00%
Premium: 30%
Effective Premium: 100% with Capped Call
Matthews South Role: Financial Advisor
Bookrunners: Goldman Sachs / Deutsche Bank
Use of Proceeds: Call Spread and Bond Repurchase, GCP
Stock Performance: (0.8)%

$125 million Convertible Offering

Multi-faceted Transaction Structuring

  • Assisted company with new convertible issuance while simultaneously exchanging 85% of their existing 2019 convertible for cash/stock
  • Exchange of 2019 convertibles required an unwind of the corresponding Bond Hedge and Warrants –Matthews South assisted the company in negotiating with the counterparties to maximize the value received

Delta-neutral Offering

  • Constructed transaction to be completely delta-neutral –2019 holders, new convertible investors, new capped call counterparties, and 2019 call spread counterparties all had offsetting buy/sell needs
  • Delta-neutral structure helped to avoid any technical pressure on share price during the day of marketing

Convertible and Capped Call Process

  • Matthews South advised the company on all relevant documentation and appropriate launch range for the convertible
  • The company worked with Matthews South to determine whether it should execute a capped call or bond hedge and warrant
  • Recommended adding financial institutions that have displayed aggressiveness in other call spread bid situations
  • Achieved 50bps / $625k savings to initial indications on call spread

Day of Marketing

  • Matthews South advised the company throughout the day of execution to help ensure that the security was priced optimally and the messaging to the market was consistent
  • The stock traded down 0.8% on the day of marketing
  • The bonds traded slightly above par after the deal priced, indicating the company achieved efficient pricing

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