By Rebecca Melvin
New York, Oct. 30 – Granite Construction Inc. priced $200 million of 2.75% convertible senior notes due 2024 at par with an initial conversion premium of 32.5%, according to a company news release on Wednesday.
Pricing came at the cheap end of talked terms for yield of 2.25% to 2.75% and initial conversion premium of 32.5% to 37.5%.
There is a $30 million greenshoe for the Rule 144A deal, which was sold via joint bookrunners BofA Securities Inc. and BNP Paribas Securities Corp.
The notes are non-callable until Nov. 7, 2022 and then provisionally callable at par if shares exceed 130% of the conversion price. There are no puts.
They have change-of-control protection in the form of a make-whole adjustment premium delivered upon conversion as incremental shares, and full dividend protection via a conversion ratio adjustment above $0.13 per quarter.
In connection with the pricing of the notes, Granite entered into convertible note hedge and warrant transactions, or a call spread, with initial purchasers of the notes. The strike price on the warrant transactions is $53.4375, representing an initial conversion premium of 125% from the issuer’s perspective.
About $22.7 million of the proceeds will be used to purchase the call spread, $29.9 million will be used to repurchase common stock and the remaining proceeds will be used to repay a portion of the company’s revolving credit facility and for general corporate purposes.
The notes will be net-share settled.
The Watsonville, Calif.-based company is a heavy civil construction and transportation contractor.
| Issuer: | Granite Construction Inc.
|
| Issue: | Senior convertible notes
|
| Amount: | $200 million
|
| Greenshoe: | $30 million
|
| Maturity: | Nov. 1, 2024
|
| Bookrunners: | BofA Securities Inc. and BNP Paribas Securities Corp.
|
| Co-managers: | BB&T Capital Markets, BBVA Securities Inc., BMO Capital Markets Corp., Comerica Securities Inc., HSBC Securities (USA) Inc. and U.S. Bancorp Investments Inc.
|
| Coupon: | 2.75%
|
| Price: | Par
|
| Yield: | 2.75%
|
| Conversion premium: | 32.5%
|
| Conversion price: | $31.47
|
| Conversion rate: | 31.7776
|
| Call spread: | Yes, warrant strike of $53.4375, represents an initial conversion premium of 125% from the issuer’s perspective
|
| Calls: | Non-callable until Nov. 7, 2022, then provisionally callable at par if shares exceed 130% of conversion price
|
| Puts: | No puts
|
| Takeover protection: | Yes, in the form of a make-whole adjustment premium delivered upon conversion as incremental shares
|
| Dividend protection: | Yes, full dividend protection via a conversion ratio adjustment above $0.13 per quarter
|
| Net-share settlement: | Yes
|
| Trade date: | Oct. 29
|
| Settlement date: | Nov. 1
|
| Distribution: | Rule 144A
|
| Price talk: | 2.25%-2.75%, up 32.5%-37.5%
|
| Listing: | NYSE: GVA
|
| Stock reference price: | $23.75 closing price on Oct. 29
|
| Market capitalization: | $1.13 billion
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