Big bang
Enphase Energy, a vertically integrated solar power management company, plugged into the convertible bond market with a two-part US$1.15bn green CB in February, the largest green convert yet in the US and securing the highest premium ever for an unrated company.
Enphase did not need the money as evidenced by the repurchase of stock later in the year at prices well below reference on the CB.
“We had been eyeing the market for some time and conditions [in February] were great for converts,” said Enphase Energy CFO Eric Branderiz. “We had enough cash to the run the company even under the most adverse scenarios but wanted to build capacity for opportunistic M&A.
“Quite honestly, we were looking for a negative yield.”
A zero coupon on both the five-year and seven-year, equally sized at US$575m, allowed Enphase to achieve conversion premiums of 70% and 57.5%, respectively, the former a record high – a negative yield, while certainly possible, would have required lower conversion thresholds.
Barclays, Bank of America and Goldman Sachs generated sufficient demand to upsize the deal from the US$1bn targeted at launch and price above premium guidance of 60%–65% for the five-year and 50%–55% for the seven-year.
Over the marketing, Enphase shares rose 5.6% to US$180.87, so the premium to pre-launch levels was nearly 80% on the 2026s, while a capped call pushed the effective premium for the company to 120%.
The green label helped achieve those record terms, but maximising the benefit from that structure required European investors.
“Green investing is more mature in Europe [than in the US],” said Branderiz. “It takes time to get them comfortable, so we had reached out to them to build awareness with the equity story.”
Marketing to European investors ahead of the CB focused on growth prospects and green merits, supported by the company's inaugural ESG annual report published in January.
All one-on-one calls attracted an order, adding up to demand of US$757m.
There were also technical factors contributing to a premium outcome.
Enphase simultaneously repurchased 2024 and 2025 CBs that were trading massively in the money. That liability management required delta hedging/unwinds by investors and call-spread counterparties as well as hedging for the new calls.
“The solution we came up with was a big bang to address a number of corporate finance objectives,” said Faiz Khan, managing director of equity-linked and financing solutions at Barclays. “One of the criteria we were given was that at least 60% of the deal went to outright buyers. We made that work despite all the technical factors.”
Enphase followed up by repurchasing US$200m of stock in the second quarter at an average cost of US$117.47 per share. The company has approval for another US$500m of stock repurchases, which remained untapped as of September 30.
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