Workday plans $1 billion sale of convertible senior notes due 2022; price talk 0%-0.5%, up 35%-40%

By Stephanie N. Rotondo

Seattle, Sept. 11 – Workday Inc. announced a $1 billion Rule 144A offering of convertible senior notes due 2022 after the market closed on Monday.

Price talk is for a 0% to 0.5% yield and an initial conversion premium of 35% to 40%, a market source reported.

Morgan Stanley & Co. LLC and BofA Merrill Lynch are the joint bookrunners.

There is a $150 million over-allotment option.

Conversions will be settled in cash, common stock or a combination of both, at the company’s option. Prior to June 1, 2022 the bonds are convertible only in certain circumstances.

The paper is convertible at any time after that date.

In connection with the offering, the Pleasanton, Calif.-based company expects to ender into convertible note hedge transactions with one or more of the initial purchasers of the notes. Workday also plans to enter into separate warrant transactions with option counterparties.

Proceeds will be used for general corporate purposes; potential repayment, repurchase, or payment of cash amounts due upon conversion of its outstanding 0.75% convertible senior notes due 2018 and 1.5% convertible senior notes due 2020; potential acquisitions and strategic transactions; and to pay the cost of the hedging transactions.

Workday is a provider of financial management and human capital management software.

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