SM Energy greenshoe increases 1.5% convertibles to $172.5 million

By Angela McDaniels

Tacoma, Wash., Aug. 12 – The underwriters of SM Energy Co.’s 1.5% five-year senior convertible notes exercised their $22.5 million over-allotment option in full, increasing the size of the issue to $172.5 million from $150 million.

As previously reported, the company priced the convertibles on Tuesday at par with an initial conversion premium of 35%.

The deal came upsized from $100 million.

Wells Fargo Securities LLC, BofA Merrill Lynch and J.P. Morgan Securities LLC are the joint bookrunners.

Holders can convert the notes – into common stock, cash or a combination thereof, at the company’s option – prior to Jan. 1, 2021 should the stock meet a 130% hurdle or if the trading price of the notes for a five-day period is less than 98% of the product of the last reported stock sale price and the conversion rate. Holders can also convert their notes prior to Jan. 1, 2021 upon the occurrence of certain corporate events.

After Jan. 1, 2021, the notes are freely convertible.

Concurrently with the notes offering, the Denver-based oil and gas company sold 18.4 million shares of common stock for $531 million of net proceeds.

The company will use the proceeds to pay the cost of capped call transactions entered into in connection with the convertibles offering and to pay a portion of the purchase price for its acquisition of the outstanding membership interests of an entity holding undeveloped leasehold interests, producing wells and associated infrastructure assets in the Midland Basin of west Texas from Rock Oil Holdings LLC.

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