Workday greenshoe fully exercised, lifts convertibles to $600 million

By Devika Patel

Knoxville, Tenn., June 24 - Underwriters for Workday Inc.'s offering of 0.75% five-year convertible senior notes and 1.5% seven-year convertible senior notes exercised their over-allotment option in full for $70 million more of the convertibles, increasing the size of the issue to $600 million, the company said in an 8-K filed Monday with the Securities and Exchange Commission. The company sold $350 million of 2018 notes and $250 million of 2020 notes.

As previously reported, the company sold the two tranches of notes at par on June 11, in a Rule 144A offering, via joint bookrunners Morgan Stanley & Co. LLC, Goldman Sachs & Co. and Barclays.

The 2018 convertibles have an initial conversion premium of 35% and an initial conversion price of $83.28, which equals a conversion ratio of 12.0075. The tranche was sized at $310 million with a $40 million greenshoe.

The 2020 convertibles have an initial conversion premium of 32.5% and an initial conversion price of $81.74, which equals a conversion ratio of 12.2340. The tranche had a $220 million initial size and a $30 million greenshoe.

Both issues are non-callable with no puts. They have contingent conversion at a price hurdle of 130%. They also have dividend protection.

In connection with the pricing of the notes, Workday entered into a call spread with initial purchasers of the bonds. The strike on the warrants boosts the effective premium from the issuer's perspective to 75%.

Proceeds will be used for general corporate purposes, with a portion retained to pay the cost of the call spread.

Pleasanton, Calif.-based Workday is a cloud-based human resources, payroll and financial management company.

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