By Abigail W. Adams
Portland, Me., Aug. 27 – K12 Inc. priced an upsized $360 million of seven-year convertible notes after the market close on Wednesday at the rich end of talk with a coupon of 1.125% and an initial conversion premium of 35%, according to a market source.
Price talk was for a coupon of 1.125% to 1.625% and an initial conversion premium of 30% to 35%.
Morgan Stanley & Co. LLC (lead left) and Citigroup Global Markets Inc. were bookrunners for the Rule 144A deal, which carries an upsized greenshoe of $60 million.
The initial size of the offering was $300 million with 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. They are putable upon a fundamental change.
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 entered into capped call transactions with a cap price of $86.17, which represents a 120% premium over the last reported sales price of stock.
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.
| Issuer: | K12 Inc.
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| Securities: | Convertible senior notes
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| Amount: | $360 million
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| Greenshoe: | $60 million
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| Maturity: | Sept. 1, 2027
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| Bookrunners: | Morgan Stanley & Co. LLC (lead left) and Citigroup Global Markets Inc.
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| Coupon: | 1.125%
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| Price: | Par
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| Yield: | 1.125%
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| Conversion premium: | 35%
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| Conversion price: | $52.88
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| Conversion rate: | 18.9109
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| Call options: | Non-callable until Sept. 6, 2024 and then subject to a 130% hurdle
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| Put options: | Upon a fundamental change
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| Pricing date: | Aug. 26
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| Settlement date: | Aug. 31
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| Distribution: | Rule 144A
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| Talk: | Coupon of 1.125% to 1.625% and initial conversion premium of 30% to 35%
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| Stock symbol: | NYSE: LRN
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| Stock price: | $39.17 at market close Aug. 26
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| Market capitalization: | $1.62 billion
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