Tetra Tech greenshoe exercise ups 2.25% convertibles to $575 million

By Mary-Katherine Stinson

Lexington, Ky., Aug. 23 – The $75 million greenshoe for Tetra Tech Inc.’s 2.25% five-year convertible senior notes was fully exercised by the bookrunners, increasing the total issue size to $575 million, according to an 8-K filed with the Securities and Exchange Commission.

The company priced the original $500 million of five-year convertible notes after the market close on Thursday at par with an initial conversion premium of 25%, as previously reported.

Price talk was for a coupon of 2.125% to 2.625% and an initial conversion premium of 22.5% to 27.5%.

BofA Securities Inc. and Wells Fargo Securities LLC were bookrunners for the Rule 144A offering.

The notes are non-callable until Aug. 20, 2026 and then subject to a 130% hurdle.

They are putable upon a fundamental change.

The notes will be settled in cash up to the principal amount with any remaining amounts to be settled in cash, shares or a combination of both.

On Aug. 17 and Aug. 18, in connection with the offering, the company entered into capped call transactions with a cap price of $259.56, which represents a premium of 65% over the last reported sales price of stock.

Net proceeds were approximately $560.4 million with the greenshoe.

Approximately $51.8 million of net proceeds were used to cover the cost of the call spread with remaining proceeds to be used to repay the $185 million outstanding under its revolving credit facility, $234.4 million in principal of its senior secured term loan due 2027 and $89.3 million in principal of its senior secured term loan due 2026.

Tetra Tech is a Pasadena, Calif.-based consulting and engineering services provider.

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