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Southwest Airlines greenshoe lifts 1.25% convertibles to $2.3 billion
By Wendy Van Sickle
Columbus, Ohio, May 1 – Underwriters for Southwest Airlines Co.’s 1.25% convertible notes due May 1, 2025 fully exercised their $300 million greenshoe, increasing the total deal size to $2.3 billion, according to an 8-K filing with the Securities and Exchange Commission.
The airline priced $2 billion of the convertibles (Baa1/BBB/BBB+) after the market close on Tuesday at par with an initial conversion premium of 35%, as previously reported.
Pricing came tighter than tightened talk for a coupon of 1.5% to 2%, a market source said.
Initial talk was for a coupon of 2% to 2.5% and an initial conversion premium of 30% to 35%.
J.P. Morgan Securities LLC, BofA Securities, Inc., Morgan Stanley & Co. LLC, BNP Paribas Securities Corp. and Citigroup Global Markets Inc. were joint bookrunners for the registered offering, which carries an upsized greenshoe of $300 million.
The initial size of the offering was $1 billion with 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 priced an upsized secondary offering of 70 million shares at $28.50 a share.
The common stock offering carries a greenshoe of 10.5 million shares. The initial size of the secondary offering was 55 million shares with a greenshoe of 8.25 million shares.
Net proceeds from the combined offerings are expected to be $3.88 billion or $4,462,772,500 if the greenshoes on the notes and secondary stock offering are exercised in full.
Proceeds will be used for general corporate purposes.
Southwest Airlines is a Dallas-based airline.
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