K12 greenshoe lifts seven-year convertibles to $420 million

By Wendy Van Sickle

Columbus, Ohio, Sept. 1 – Underwriters for K12 Inc.’s 1.125% seven-year convertible notes fully exercised their $60 million greenshoe on Monday, lifting the total deal size to $420 million, according to an 8-K filing with the Securities and Exchange Commission.

The company priced an upsized $360 million of the convertibles after the market close on Aug. 27 at the rich end of talk with an initial conversion premium of 35%, as previously reported

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.

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.

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