Hannon Armstrong greenshoe ups 3.75% convertibles to $402.5 million

By Wendy Van Sickle

Columbus, Ohio, Aug. 11 – Underwriters for HAT Holdings I LLC and HAT Holdings II LLC’s 3.75% five-year green notes exchangeable for Hannon Armstrong Sustainable Infrastructure Capital Inc. stock fully exercised their $52.5 million greenshoe, increasing the total size of the deal to $402.5 million, according to an 8-K filing with the Securities and Exchange Commission.

The issuers priced the initial $350 million of the convertibles after the market close on Aug. 7 at par with an initial conversion premium of 25%, as previously reported.

Pricing came at the cheap end of talk for a coupon of 3.25% to 3.75% and at the midpoint of talk for an initial conversion premium of 22.5% to 27.5%.

Morgan Stanley & Co. LLC was bookrunner for the Rule 144A offering.

The notes are non-callable until Aug. 20, 2026 and then subject to a 130% hurdle or are freely callable if necessary to maintain Hannon’s status as a REIT.

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

In connection with the offering, the company will use $32.9 million of cash on hand to enter into capped call transactions with a strike price of $43.42, which represents a 100% premium over the last reported price of stock.

The company entered into privately negotiated transactions with holders of its 0% convertible notes due 2023 to repurchase for cash $76.3 million in principal of the outstanding amount.

Net proceeds are $393.4 million with the greenshoe.

About $76.3 million of net proceeds will be used fund the repurchase of the 2023 notes with remaining proceeds to be used to invest in or refinance eligible green projects.

Hannon Armstrong is an Annapolis, Md.-based climate solutions real estate investment trust.

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