By Stephanie N. Rotondo
Seattle, Feb. 5 – Hess Corp. priced a $500 million offering of 8% series A mandatory convertible preferred stock at par of $50.00 on Friday with a 17.5% initial conversion premium, the company said in a news release.
Pricing of the convertibles came at the cheap end of talk, which was for a 7.5% to 8% dividend and a 17.5% to 22.5% initial conversion premium.
The company is doing the offering concurrently with an underwritten public offering of 25 million shares of common stock priced at $39.00 per share. However, neither deal is contingent upon the other.
Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are acting as bookrunning managers for the concurrent offerings.
The $50-par preferreds will be issued as depositary shares representing a 1/20th interest. The deal includes a greenshoe of up to 1.5 million additional preferreds, or $75 million.
The convertible preferreds will automatically convert into 21.822 to 25.642 shares of common stock on Feb. 1, 2019. That equals a conversion ratio of 1.0911 to 1.2821. The amount depends upon the volume-weighted average price of the common stock over a 20-day period prior to the conversion date.
The conversion price is $45.8253.
There is standard dividend protection for dividends greater than $0.25 per share per quarter. There is also protection in case of a fundamental change in the form of early settlement with make-whole for certain cash mergers and changes in control.
About $32.5 million of the net proceeds from the preferred shares will be used to pay the cost of capped call transactions, which raises the conversion price from the issuer’s perspective to $53.6250 and the conversion premium to 37.5%.
Remaining proceeds will be used to strengthen the company’s balance sheet and for general corporate purposes, which may include funding long-term capital needs.
Hess is a New York-based independent oil and gas producer.
| Issuer: | Hess Corp.
|
| Securities: | Series A mandatory convertible preferred stock
|
| Amount: | $500 million, or 10 million shares
|
| Greenshoe: | $75 million, or 1.5 million shares
|
| Maturity: | Feb. 1, 2019
|
| Bookrunners: | Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC
|
| Dividend: | 8%
|
| Price: | Par of $50.00
|
| Conversion premium: | 17.5%
|
| Threshold appreciation price: | $45.8253
|
| Conversion ratio: | 21.822 to 25.642
|
| Dividend protection: | Yes, for dividends greater than $0.25 per share per quarter
|
| Takeover protection: | Yes, early settlement with make-whole payment
|
| Price talk: | 7.5%-8%, up 17.5%-22.5%
|
| Pricing date: | Feb. 5
|
| Settlement date: | Feb. 10
|
| Stock symbol: | NYSE: HES
|
| Stock price: | $43.47 at close on Feb. 4, reference price: $39.00
|
| Market capitalization: | $11.2 billion
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