By Stephanie N. Rotondo
Seattle, Aug. 9 – SM Energy Co. sold $150 million of 1.5% five-year senior convertible notes at par with an initial conversion premium of 35% on Tuesday, the company said in an FWP filed with the Securities and Exchange Commission.
There is a $22.5 million over-allotment option.
The deal came upsized from $100 million.
Wells Fargo Securities LLC, BofA Merrill Lynch and J.P. Morgan Securities LLC are the joint bookrunners.
Interest will be payable Jan. 1 and July 1. Holders can convert the notes – to common stock, cash or a combination thereof, at the company’s option – prior to Jan. 1, 2021 should the stock meet a 130% hurdle, or if the trading price of the notes for a five-day period is less than 98% of the product of the last reported stock sale price and the conversion rate.
Holders can also convert their holding prior to Jan. 1, 2021 upon the occurrence of certain corporate events.
After Jan. 1, 2021, the notes can be converted at any time.
The initial conversion rate is 24.6914 shares per each $1,000 of notes, or the equivalent to an initial share price of $40.50.
The conversion rate increases upon a fundamental change to include a make-whole premium, based on the current stock price and the date of the change.
In connection with the offering, the company expects to enter into privately negotiated capped call transactions with one or more of the underwriters or their respective affiliates. The option counterparties or their respective affiliates meantime expect to enter into derivative transactions related to SM Energy’s common stock concurrently with or shortly after the pricing of the notes. This activity could increase, or reduce the size of any decrease in, the market price of SM Energy’s common stock or the notes at that time.
Additionally, the option counterparties or their affiliates may modify their hedge positions by entering into or unwinding derivatives related to SM Energy’s common stock and/or purchasing or selling SM Energy’s common stock or other securities of SM Energy in secondary market transactions following the pricing of the notes and prior to the maturity of the notes, and are likely to do so during any observation period related to a conversion of notes.
Concurrently with the notes offering, the Denver-based oil and gas company is selling 15 million shares of its common stock. That deal includes a 2.25 million-share over-allotment option.
Proceeds will be used to pay a portion of the purchase price for the recently announced acquisition of all the outstanding membership interests of an entity holding undeveloped leasehold interests, producing wells and associated infrastructure assets in the Midland Basin of West Texas from Rock Oil Holdings LLC.
If the acquisition does not close, SM Energy intends to use the proceeds for general corporate purposes.
| Issuer: | SM Energy Co.
|
| Securities: | Senior convertible notes
|
| Amount: | $150 million
|
| Greenshoe: | $22.5 million
|
| Maturity: | July 1, 2021
|
| Bookrunners: | Wells Fargo Securities LLC, BofA Merrill Lynch, J.P. Morgan Securities LLC
|
| Co-managers: | Barclays, BBVA
|
| Coupon: | 1.5%
|
| Price: | Par of $1,000
|
| Yield: | 1.5%
|
| Call option: | Non-callable for life
|
| Conversion premium: | 35%
|
| Conversion price: | $40.50 per share
|
| Conversion rate: | 24.6914 shares
|
| Pricing date: | Aug. 9
|
| Settlement date: | Aug. 12
|
| Stock symbol: | NYSE: SM
|
| Stock price: | $31.06 as of Aug. 8 close
|
| Cusip: | 78454LAM2
|
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