ProPetro Plans $500M Convertible Notes Offering

By Chris Stiles • Monday, May 04 11:57 • Permanent Link

ProPetro Holding Corp. said it plans to raise $500 million through a private offering of convertible senior notes due 2031, with an option for initial purchasers to buy an additional $75 million. If that extra allotment is taken up, the total offering would rise to $575 million.

The company said it expects to use part of the proceeds to pay for capped call transactions, which are intended to reduce potential dilution from future conversions. The rest is slated for general corporate purposes, including growth capital for additional power generation equipment.

The notes will mature on Nov. 15, 2031, unless repurchased, redeemed or converted earlier. ProPetro said noteholders will be able to convert under certain circumstances and during specified periods, and the company can settle conversions in cash, shares, or a mix of both at its election.

ProPetro said it may redeem the notes starting May 15, 2029, and through the 45th scheduled trading day before maturity, but only if its stock trades above 130% of the conversion price for a specified period and other conditions are met. In that case, redemption would be at principal plus accrued interest.

The company also said noteholders could require a repurchase for cash if certain “fundamental change” events occur, again at principal plus accrued interest.

Alongside the offering, ProPetro expects to enter into capped call transactions covering the shares initially underlying the notes. If the extra $75 million of notes is sold, it expects to add more capped call transactions.

ProPetro said the hedge structure is designed to offset potential cash payments above principal and reduce dilution, but only up to the cap price. If its stock rises above that cap, dilution and/or extra cash payments could still occur.

The company said the offering is aimed at optimizing its capital structure, while also funding growth capital tied to additional power generation equipment. The market has reacted to these announcements by moving the company's shares 1.01% to a price of $17.00. For more information, read the company's full 8-K submission here.

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