Xero Limited, the cloud-based accounting platform that’s listed on the Australian Securities Exchange (ASX), has priced zero coupon US$700 million ($940.0 million) worth of senior unsecured convertible notes, issued by Xero Investments and guaranteed by Xero.
The US$-denominated notes are issued in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof.
The notes will mature on Dec 2, 2025.
The initial conversion price of the notes is US$134.7246 per ordinary share, which represents a conversion premium of 35% over the reference share price. The reference share price is based on a Fixed Exchange Rate of A$1 (98.5 cents) to 73.45 US cents.
The settlement of the offering is expected on Dec 2, 2020.
Goldman Sachs International and Morgan Stanley are the joint lead managers on the offering.
Xero says net proceeds of approximately US$685.3 million, after deducting commissions and relevant fees, will be used to fund the costs of the call option transactions, to repurchase existing notes, for potential acquisitions and strategic investments and for general corporate purposes.
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Xero, in the same statement, says it has also been successful in conducting a partial buyback of US$294.031 million of the guaranteed convertible notes due 2023 at a price of US$448,670 per US$200,000 of the principal amount of the existing notes for a total consideration of about US$659.6 million.
As part payment of about US$374.2 million of the total buyback consideration, Xero will issue 3,750,005 ordinary shares based on the reference share price of A$135.86.
The remaining buyback consideration will be settled in cash of about US$285.4 million.
In addition, the company will conduct a new call spread transaction, where the joint lead managers and other counterparties (option counterparties) will grant call options to Xero Investments of some 5.2 million shares in Xero at an average exercise price of US$134.7246 per share.
These call options will be cash settled and expire in five years.
In the same transaction, Xero Investments will grant call options to the option counterparties in respect of 5.2 million Xero shares at an average exercise price of US$174.64 per share.
These call options will be physically settled by the issue of Xero ordinary shares and expire in 5 years.
The transactions are also expected to close on Dec 2, 2020.
As at 3.32pm, shares in Xero are trading 4.4% down at A$129.94.
