By Abigail W. Adams
Portland, Me., Feb. 22 – Q2 Holdings Inc. priced $200 million of five-year convertible notes prior to the market open on Thursday at par with a coupon of 0.75% and an initial conversion premium of 27.5%.
Pricing came at the rich end of talk for a coupon of 0.75% to 1.25% and an initial conversion premium 22.5% to 27.5%.
Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and Stifel Nicolaus are the bookrunners for the Rule 144A deal, which carries a greenshoe of $30 million. The notes are non-callable and there are no puts.
There is standard dividend and takeover protection.
The notes are contingently convertible until Nov. 15, 2022 when they become freely convertible.
The conversion rate of 17.4292 is subject to adjustment in certain events, according to a company news release. The notes are convertible into cash, shares or a combination of both at the company’s option.
In connection with the offering, Q2 Holdings entered into hedge transactions that will cover the number of shares of common stock underlying the convertible notes. Q2 Holdings also entered into warrant transactions for up to the same number of shares of common stock.
The warrants carry a strike price of $78.75 per share, representing an initial conversion premium of 75% from the company’s perspective. The warrants will be settled on a net share basis, or cash, according to a company news release.
Net proceeds are expected to be $192.8 million, or $223 million if the greenshoe is exercised. Proceeds will be used to cover the cost of the call spread and for general corporate purposes.
Q2 Holdings is an Austin, Texas-based provider of cloud-based digital banking services.
| Issuer: | Q2 Holdings Inc.
|
| Securities: | Convertible senior notes
|
| Amount: | $200 million
|
| Greenshoe: | $30 million
|
| Maturity: | Feb. 15, 2023
|
| Bookrunners: | Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and Stifel Nicolaus
|
| Coupon: | 0.75%
|
| Price: | Par
|
| Yield: | 0.75%
|
| Conversion premium: | 27.5%
|
| Conversion price: | $57.38
|
| Conversion rate: | 17.4292
|
| Call options: | None
|
| Put options: | Upon a fundamental change
|
| Warrant strike price | $78.75
|
| Pricing date: | Feb. 22
|
| Settlement date: | Feb. 26
|
| Distribution: | Rule 144A
|
| Talk: | Coupon of 0.75% to 1.25% and initial conversion premium of 22.5% to 27.5%
|
| Stock symbol: | NYSE: QTWO
|
| Stock price: | $45.00 as of the market close Feb. 21
|
| Market capitalization: | $1.89 billion
|
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