SmileDirectClub greenshoe lifts 0% convertibles to $747.5 million

By Wendy Van Sickle

Columbus, Ohio, Feb. 16 – Underwriters for SmileDirectClub Inc.’s 0% five-year convertible notes exercised their full $97.5 million greenshoe, increasing the total deal size to $747.5 million, according to an 8-K filing with the Securities and Exchange Commission.

The underwriters exercised an initial $70 million portion of the greenshoe on Feb. 10 and the remaining $27.5 million on Feb. 11.

The company priced an upsized $650 million of the five-year convertible notes after the market close last Thursday at par with a coupon of 0% and an initial conversion premium of 40%, as previously reported.

Pricing came in line with tightened talk for a fixed coupon of 0% and at the rich end of talk for an initial conversion premium of 35% to 40%, according to a market source.

Initial price talk was for a coupon of 0% to 0.5% and an initial conversion premium of 30% to 35%, according to a market source.

J.P. Morgan Securities LLC and Citigroup Global Markets Inc. are joint bookrunners for the Rule 144A offering.

The initial size of the offering was $350 million with a greenshoe of $52.5 million.

The notes are non-callable until Feb. 6, 2024 and then subject to a 130% hurdle.

There is takeover and dividend protection.

The notes will be settled in cash, shares or a combination of both at the company’s option.

In connection with the offering, the company entered into capped call transactions with a cap price of $25.80, which represents a premium of 100% over the last reported sales price of stock.

Net proceeds are expected to be $725 million with the greenshoe exercised in full.

Approximately $60 million of net proceeds will be used to cover the call spread with the remaining amount to be used for general corporate purposes, which may include repaying outstanding amounts under its credit facilities.

SmileDirectClub is a Nashville-based oral care company.

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