Splunk talks $900 million seven-year convertible notes to yield 0.875%-1.375%, up 32.5%-37.5%

By Abigail W. Adams

Portland, Me., June 1 – Splunk Inc. plans to price $900 million of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.875% to 1.375% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Morgan Stanley & Co. LLC is lead left bookrunner for the Rule 144A offering, which carries a greenshoe of $135 million.

The notes are non-callable for four years and then subject to a 130% hurdle with a make-whole.

The stock reference price will be the volume weighted average price of stock during Tuesday’s session.

In connection with the pricing of the notes, the company will enter into capped call transactions.

Proceeds will be used to cover the cost of the call spread and to repurchase for cash $500 million of the principal amount of its 0.5% convertible notes due 2023.

Remaining proceeds will be used for working capital and general corporate purposes.

Splunk is a San Francisco-based software company focused on analyzing machine-generated big data.

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