Chegg talks $250 million five-year convertible notes to yield 0% to 0.5%, up 27.5% to 32.5%

By Abigail W. Adams

Portland, Me., March 28 – Chegg Inc. plans to price $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Morgan Stanley & Co. Inc. and BofA Merrill Lynch are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $37.5 million. Allen & Co. LLC is the co-manager.

The notes are contingently convertible until Feb. 15, 2023. They will be settled in cash, shares or a combination of both at the company’s option.

The notes are non-callable until May 20, 2021 and then may be redeemed subject to a 130% hurdle.

The notes are puttable upon a fundamental change.

There is a call spread.

In addition to the capped call transactions, Chegg will use approximately $20 million of proceeds to repurchase its stock at a price equal to the closing price on the date of the pricing.

Proceeds will be used to cover the cost of the call spread, for the share buy-back and for general corporate purposes.

Chegg is a Santa Clara, Calif.-based online textbook rental, tutoring, scholarship and internship matching company.

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