By Susanna Moon
Chicago, Aug. 24 - Callaway Golf Co. said it agreed to issue new convertible notes and shares in exchange for its 7.5% series B cumulative perpetual convertible preferred stock.
In exchange for 982,361 shares of its 7.5% preferreds, the company will issue $63,227,000 principal amount of new 3.75% convertible senior notes due 2019 and 5,866,821 shares in the separate, privately negotiated exchange agreements, according to a company press release.
The preferreds have a conversion price of $7.05 per share and a liquidation preference of $100 per share. After the exchange, 417,639 shares will remain outstanding.
In addition, the company entered into private placement purchase agreements under which it will receive proceeds of $46,819,205 in exchange for an additional $49,273,000 principal amount of the same 3.75% convertibles.
Settlement is slated for Aug. 29.
The new notes are convertible at any time before the close of business on the business day immediately preceding Aug. 15, 2019 into shares at a conversion rate of about 133.3333 shares per $1,000 principal amount. The conversion price is about $7.50 per share, which is a 20.77% premium to the company's closing price on Aug. 23.
The company may terminate the conversion right anytime the volume-weighted average price of the company's shares trade above $9.75 for a specified period.
The notes are callable at par plus accrued interest beginning Aug. 15, 2015.
"These transactions substantially lower the company's cost of capital and are immediately accretive to earnings per share," Chip Brewer, president and chief executive officer of Callaway Golf, said in the release.
"At current earnings levels, these transactions are accretive by over $0.12 per share on an annualized basis. In addition, we have raised approximately $43 million in cash, net of transaction costs, and retained our right to redeem at any time the remaining 417,639 outstanding shares of preferred stock at their liquidation preference.
"I am pleased we were able to enter into these transactions, which are consistent with our turnaround plan and are in addition to the cost-reduction initiatives we announced in July."
Based in Carlsbad, Calif., Callaway manufactures and sells golf clubs and golf balls.
| Issuer: | Callaway Golf Co.
|
| Issue: | Convertible senior notes
|
| Maturity: | 2019
|
| Coupon: | 3.75%
|
| Price: | Par
|
| Conversion premium: | 20.77%
|
| Conversion price: | $7.50
|
| Conversion ratio: | 133.3333 shares
|
| Call: | At par beginning Aug. 15, 2015
|
| Pricing date: | Aug. 24
|
| Settlement date: | Aug. 29
|
| Stock symbol: | NYSE: ELY
|
| Stock price: | $6.21 at close Aug. 23
|
| Market capitalization: | $377.59 million
|
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