Penguin Solutions said it plans to raise $650 million through a private offering of convertible senior notes due 2031, with an option for initial purchasers to buy another $100 million. If fully exercised, the deal would total $750 million.
At the same time, the company said it expects to exchange a portion of its existing 2.00% convertible senior notes due 2029 and 2030 for a mix of cash and shares. Those exchanges would be done with a limited number of holders, and Penguin said it may later do additional exchanges, repurchases or induced conversions.
The company said it plans to use the proceeds from the new notes to fund capped call transactions, cover the cash portion of the note exchanges, repay $100 million outstanding under its credit agreement, and support general corporate purposes.
The new notes would mature on Aug. 1, 2031. They would be convertible only under certain conditions before May 1, 2031, and freely convertible by holders from May 1, 2031 until two trading days before maturity. Penguin also said it could redeem the notes for cash starting Aug. 6, 2029, if its stock trades above 130% of the conversion price for a specified period.
The company said the capped call transactions are intended to reduce dilution from conversion of the new notes and offset cash payments above principal. If the stock price rises above the cap price, dilution could still occur beyond that level.
Penguin also said holders of the existing notes who take part in the exchanges, repurchases or induced conversions may trade the company’s stock or use derivatives, which could move the share price and affect the trading price of the new notes. As a result of these announcements, the company's shares have moved -8.43% on the market, and are now trading at a price of $60.41. If you want to know more, read the company's complete 8-K report here.
