Dropbox to price $1.14 billion of five- and seven-year convertibles

By Abigail W. Adams

Portland, Me., Feb. 22 – Dropbox Inc. plans to price $1.135 billion convertible notes in five- and seven-year tranches, according to a market source.

The deal consists of a $567.5 million tranche of five-year convertible notes with price talk for a fixed coupon of 0% and an initial conversion premium of 55% to 60%.

The deal also consists of a $567.5 million tranche of seven-year convertible notes with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 47.5% to 52.5%.

J.P. Morgan Securities LLC (lead left), Goldman Sachs & Co. LLC, RBC Capital Markets Corp. and BofA Securities Inc. are joint bookrunners for the Rule 144A offering.

Both tranches carry a greenshoe of $56.75 million.

The 2026 notes are non-callable for three years and then subject to a 130% hurdle.

The 2028 notes are non-callable for four years and then subject to a 130% hurdle.

There is dividend and takeover protection.

The notes will be settled up to par in cash with any excess to be settled in cash, shares or a combination of both at the company’s option.

In connection the offering, the company will enter into convertible note hedge and warrant transactions.

Proceeds will be used to cover the cost of the hedge transactions, to repurchase shares of its class A common stock and for general corporate purposes.

Dropbox is a San Francisco-based file hosting service provider.

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