Convertible Liability Management

A company with outstanding convertible debt has several refinancing choices, including straight debt, convertible debt, or equity. The most common approach for convertible issuers is to refinance with a new convertible, as other market options are either more expensive (e.g. equity) or have a higher fixed income cost (e.g. straight debt). However, depending on the stock price performance and any new call spread strike, refinancing with a new convertible could be expensive in the future. Alternatively, companies can consider a 4(a)(2) private exchange, which involves approaching key existing investors to swap their existing securities into a longer-dated deal.

Banks and firms have varying preferences for strategies based on their competitive positioning:

• Large banks favor the new convertible issue and repurchase structure as it enables them to leverage their full salesforce for marketing and earn league table credit
• Conversely, small boutiques and firms that do not have a large salesforce will often push for an exchange because they can rely on a handful of existing investors to get the deal done

ICR Capital’s Convertible and Equity Derivatives Advisory team possesses the expertise to assist you in objectively evaluating options and determine the best approach for your company’s unique needs. We understand the complexities of these transactions and offer the necessary guidance and support to help you achieve your objectives. As an independent and trusted advisor, we are committed to helping you position your company for long-term success.