Box smoothed its convertible bond maturities by buying back some of existing zero-coupon bonds funded with proceeds from sale late on Tuesday of a new US$400m five-year CB.
Of the US$345m of outstanding paper, the cloud file-sharing platform bought back US$140m, chipping that January 2026 maturity to US$205m funded with the new CB maturing in 2029.
“They kind of stuck the landing here,” said one equity-linked banker involved in the financing. “I think they made the right decision by leaving a portion of the existing bonds in place.”
After a day of marketing, Morgan Stanley, JP Morgan and Bank of America priced the new security at a 1.5% coupon and 30% conversion premium, toward the aggressive ends of 1.5%–2% and 27.5%–32.5% talk. J Wood Capital Advisors was independent adviser.
Box’s shares fell just 0.06% (two cents) on Tuesday to US$33.43, earning high marks from equity-linked judges around the world.
The new bonds sold traded to 102 in the aftermarket on Wednesday, so a profitable entry for investors on the landing.
Underpinning the execution, the zero-coupon CB is convertible at US$25.78 so is deeply in-the-money and fully hedged by holders. Buying back US$140m of those bonds allowed holders to roll over hedges into the new deal, limiting the share-price impact.
Box also spent US$45.6m to purchase a capped call to offset dilution from the new CB up to a share price of US$66.86, a 100% premium to reference.
The capped call equity derivative also contributed to the two-cent landing on purchases of the of the underlying shares by counterparty banks to hedge long-delivery of stock above the upper strike.
Highlighting the positive economics of the capped call, Box collected US$30.3m from unwinding the capped call on the US$140m of zero-coupon bonds repurchased.