Summit Hotel greenshoe lifts 1.5% convertibles to $287.5 million

By Taylor Fox

New York, Jan. 12 – Underwriters for Summit Hotel Properties Inc.’s offering of 1.5% convertible senior notes due 2026 exercised their $37.5 million over-allotment option in full, increasing the total size of the offering to $287.5 million, according to a news release.

Summit priced an upsized $250 million of the five-year convertible notes after the market close on Jan. 7 at par at the rich end of talk with a coupon of 1.5% and an initial conversion premium of 37.5%.

The initial size of the offering was $200 million with a greenshoe of $30 million.

BofA Securities and Deutsche Bank Securities are the joint bookrunners for the registered offering.

The notes are non-callable until Feb. 20, 2024 and then subject to a 130% hurdle.

They are putable upon a fundamental change. There is dividend protection.

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

In connection with the pricing of the notes, the company entered into capped call transactions with a cap price of $15.26, which represents a premium of 75% over the last reported sales price of stock.

Approximately $18.4 million of the net proceeds will be used to cover the cost of the call spread.

Remaining proceeds will be used to repay debt under the company’s senior unsecured revolving credit facility and term loans and for general corporate purposes.

Summit Hotel Properties is an Austin, Tex.-based real estate investment trust focused on hotels for middle and upscale markets.

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