Southwest Airlines talks $1 billion five-year convertibles to yield 2%-2.5%, up 30%-35%

By Abigail W. Adams

Portland, Me., April 28 – Southwest Airlines Co. plans to price $1 billion of five-year convertible notes (BBB) after the market close on Tuesday with price talk for a coupon of 2% to 2.5% and an initial conversion premium of 30% to 35%, according to a market source.

J.P. Morgan Securities LLC, BofA Securities Inc., Morgan Stanley & Co. LLC, BNP Paribas Securities Corp. and Citigroup Global Markets Inc. are joint bookrunners for the registered offering, which carries a greenshoe of $150 million.

The notes are non-callable.

They are contingently convertible until Feb. 1, 2025 subject to a 130% trigger.

The notes are putable upon a fundamental change.

There is standard dividend protection.

The notes will be settled in cash, shares, or a combination of both at the company’s option.

Concurrently with the convertible notes, the company plans to price a secondary offering of 55 million shares. The secondary offering carries a greenshoe of 8.25 million shares.

Proceeds will be used for general corporate purposes.

Southwest Airlines is a Dallas-based airline.

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