Morning Commentary: Maxeon Solar Technologies convertibles offering ‘unprecedented’

By Abigail W. Adams

Portland, Me., July 9 – The convertibles primary market was not quite ready to call it a week and launched an overnight deal prior to the market open.

However, the deal had many market sources scratching their heads.

Maxeon Solar Technologies Pte. Ltd. plans to price $175 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 5.5% to 6.5% and an initial conversion premium of 15% to 25%, according to a market source.

Maxeon is a wholly owned subsidiary of SunPower Corp. with plans to be spun off into an independent company.

If Maxeon’s spinoff does not occur within three months of the issuance of the notes, or if the forward purchase transactions to facilitate swap trades are not satisfied, the company will be required to repurchase the notes at 101% of their principal amount plus interest.

To facilitate swap transactions, the company will pay $40 million to purchase a number of shares at a price determined by the convertible note valuation period at maturity.

The company will also deliver $50 million shares to BofA Securities to sell during the note valuation period.

The notes will not be convertible when first issued.

The conversion rate will be determined by the average VWAP over 15 consecutive trading days beginning on the fifth trading day after which Maxeon shares trade.

The offering from a company that has not yet gone public is “unprecedented,” a market source said.

The deal is more like what occurs in the private sector.

The offering is more like a private deal that is being publicly marketed, perhaps to take advantage of the euphoria in the market, the source said.

The “private private” market is usually where convertibles are issued with contingency features about them eventually going public.

The deal was optically very attractive, a source said.

However, with no publicly traded stock or credit history, “I don’t think this can be modeled,” another source said.

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