K12 talks $300 million seven-year convertible notes to yield 1.125%-1.625%, up 30%-35%

By Abigail W. Adams

Portland, Me., Aug. 26 – K12 Inc. plans to price $300 million of seven-year convertible senior notes after the market close on Wednesday with price talk for a coupon of 1.125% to 1.625% and an initial conversion premium of 30% to 35%, according to a market source.

Morgan Stanley & Co. LLC is lead left bookrunner for the Rule 144A deal, which carries a greenshoe of $45 million.

The notes are contingently convertible until June 1, 2027.

They are non-callable until Sept. 6, 2024 and then subject to a 130% hurdle.

The notes will be settled in cash, shares or a combination of both at the company’s option.

In connection with the pricing of the notes, the company will enter into capped call transactions.

Proceeds will be used to fund the cost of the call spread, to repay the outstanding balance under K12’s credit facility and for general corporate purposes.

K12 is a Herndon, Va.-based for-profit online education company.

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