KEYW greenshoe exercise lifts 2.5% convertibles to $149.5 million

By Jennifer Chiou

New York, Aug. 15 – KEYW Holding Corp. said that underwriters exercised in full their $19.5 million over-allotment option, bringing the company’s issue of 2.5% convertible senior notes due 2019 to $149.5 million.

The securities were sold via RBC Capital Markets LLC and BofA Merrill Lynch as joint bookrunners.

According to an 8-K filing with the Securities and Exchange Commission, the company entered into additional capped call transactions with Royal Bank of Canada and Bank of America, NA in connection with the greenshoe exercise. The capped call transactions have an initial strike price of $14.8348 per share, which corresponds to the initial conversion price of the notes and is subject to anti-dilution adjustments substantially similar to those that apply to the notes, and have a cap price of $19.3760.

The capped call transactions cover, subject to anti-dilution adjustments, 1,314,481 shares of the company’s common stock, which is the same number of shares of the company’s common stock initially underlying the option notes.

As reported, KEYW priced an upsized $130 million of the notes at par on July 16 with an initial conversion premium of 22.5%.

The registered, off-the-shelf deal was initially talked at $125 million in size. The greenshoe was upsized from $18.75 million.

Pricing came at the cheap end of talk, which was for a 2% to 2.5% coupon and a 22.5% to 27.5% premium.

The notes are non-callable for life.

A portion of the proceeds will be used to pay the net cost of the capped call. The majority of proceeds will be used to repay the company’s outstanding balances under an existing credit facility, with remaining proceeds to be used for working capital, capital expenditures and other general corporate purposes, including potential acquisitions.

Hanover, Md.-based KEYW is a cyber-security services company.

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