Convertible Liability Management

There are a number of refinancing options available to a company that has convertible debt outstanding, including straight debt, convertible debt, or equity. Refinancing an existing convertible with a new convertible is the most common strategy for convertible issuers since 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 new call spread strike and the stock price performance, 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. This approach can offer several benefits, including less documentation and diligence, lower fees, and less market risk if structured as a wall cross and overnight process.

Different banks and firms push for different strategies based on their competitive position. Large banks prefer the new convertible issue and repurchase structure because they have a full salesforce to market the deal and it also allows them to receive league table credit. On the other hand, small boutiques and firms that do not have a large salesforce will often push for an exchange because they can call a handful of existing investors to get the deal done.

ICR Capital’s Convertible and Equity Derivatives Advisory team has the expertise to help you objectively evaluate your options and determine the best approach for your company’s specific needs. We understand the complexities of these transactions and will provide the guidance and support you need in order to achieve your objectives. As an independent and trusted advisor, we are dedicated to helping you position your company for long-term success.