Guess? to issue $275 million 3.75% convertibles due 2028, partially through exchange

By Mary-Katherine Stinson

Lexington, Ky., April 13 – Guess?, Inc. will issue a total of $275 million new 3.75% convertible bonds due 2028, with a portion of the issuance accounted for by an exchange with noteholders of the company’s existing 2% convertible senior notes due 2024, according to a press release.

Guess? entered into separate, privately negotiated exchange and subscription agreements with a limited number of holders of its 2% convertible senior notes due 2024 and certain other investors to exchange approximately $184.9 million in aggregate principal amount of the existing notes for approximately $161.4 million in aggregate principal amount of new 3.75% convertible senior notes due April 15, 2028 and approximately $33.3 million in cash representing accrued interest and other consideration on the existing notes.

The new notes are expected to settle on or about April 17 subject to customary closing conditions.

The new notes will be convertible into cash, company shares or a combination of both at the company’s option.

The initial conversion rate will be around 40.4858 shares per $1,000 principal amount of the new notes, which is equivalent to an initial conversion price of approximately $24.70 per share, subject to adjustment. This represents a premium of approximately 30% over the last reported sale price of the common stock on the New York Stock Exchange on April 12.

Concurrently with the pricing of the new notes, Guess will use a portion of the proceeds to fund the repurchase of $42.5 million of its common stock from purchasers of the new convertibles in privately negotiated transactions at a purchase price of $19 per share, which equals the stock’s closing sale price on April 12. These repurchases are expected to settle concurrently with the closing of the other transactions.

The company also expects to use approximately $31.6 million of the proceeds from the private placement to pay the cost of the convertible note hedge transactions after such cost is partially offset by the proceeds from the sale of warrants. The warrant strike price is initially $41.80, which represents a 120% premium to the company’s closing stock price on April 12.

The remaining proceeds will be used for general corporate purposes.

Upon completion of the transactions, the aggregate principal amount of the existing convertible notes outstanding will be approximately $115 million, and the aggregate principal amount of the new convertible notes outstanding will be $275 million.

Guess? is a Los Angeles-based designer, marketer and distributor of casual apparel and accessories.

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