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Chegg greenshoe lifts 0% six-year convertibles to $1 billion
By Taylor Fox
New York, Aug. 21 – Underwriters for Chegg Inc.’s six-year convertible notes fully exercised their $100 million greenshoe, lifting the total deal size to $1 billion, according to a news release Friday.
The company priced $900 million of the notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 37.5%.
Pricing came at the rich end of revised price talk for a coupon of 0% to 0.125% and in line with revised talk for an initial conversion premium of 37.5%, according to a market source.
Talk tightened from the initial price talk of a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%.
Morgan Stanley & Co. LLC was the bookrunner for the Rule 144A offering.
The initial size of the deal was $750 million with a greenshoe of $112.5 million.
The notes are contingently convertible until June 1, 2026.
They are non-callable until Sept. 5, 2023 and then subject to a 130% hurdle.
The notes are putable upon a fundamental change.
Concurrently with the pricing of the notes, the company exchanged $172 million of the principal amount of its existing 0.25% convertible notes due 2023 for $174.7 million in cash and 4.2 million shares.
In connection with the pricing, the company entered into capped call transactions.
Net proceeds are expected to be $984.2 million with the greenshoe exercised in full.
Approximately $93.1 million of proceeds will be used to cover the cost of the call spread and $174.7 million will be used to the cash portion of the exchange for the 0.25% convertible notes due 2023.
Remaining proceeds will be used for general corporate purposes, which may include acquisitions or strategic transactions.
Chegg is a Santa Clara, Calif.-based online textbook rental, tutoring, scholarship and internship matching company.
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