BILL Closes $1.4 Billion Convertible Senior Notes Offering

BILL Closes $1.4 Billion Convertible Senior Notes Offering

BILL Holdings, Inc. (NYSE: BILL) has successfully completed its offering of 0% Convertible Senior Notes due 2030, raising substantial gross proceeds of $1.4 billion. This offering also included the full exercise of an option allowing initial purchasers to buy an additional $150 million of notes. The Notes were offered in a private placement to qualified institutional buyers under Rule 144A of the Securities Act.

Structure and Use of Proceeds

The Notes issued are senior and unsecured obligations, meaning they do not carry regular interest and their principal amount will not accrue. BILL anticipates that net proceeds from this offering will approximate $1.38 billion after deducting discounts and expenses related to the issuance.

Proceeds from the offering have been allocated strategically to enhance BILL's operational framework. Specifically, about $130.8 million will be utilized to repurchase approximately $133.9 million in outstanding 0% Convertible Senior Notes due 2025. Additionally, around $408.6 million will be applied to buy back roughly $451.5 million in existing notes due 2027. Furthermore, BILL has earmarked approximately $200 million for repurchasing 2,260,397 shares of its common stock. The remaining proceeds will be used for general corporate purposes, possibly including further buybacks of existing notes and additional stock repurchases.

Details of the Notes

The Convertible Senior Notes will mature on April 1, 2030. Initially, holders can convert their Notes before a specific time in 2030, subjected to certain conditions. After this period, conversion can take place anytime until the second trading day ahead of the maturity date. Upon conversion, BILL can settle in shares of its common stock, cash, or a mix of both, thus offering flexible options for noteholders.

The initial conversion rate for these Notes stands at 8.3718 shares of common stock for every $1,000 principal amount. This equates to an initial conversion price of roughly $119.45 per share, which reflects a premium of about 35% compared to the closing price of BILL’s common stock.

Repurchase Rights and Redemption Considerations

Holders of these Notes possess the right to require BILL to repurchase all or portions of the Notes for cash at the principal amount upon significant corporate changes. In such events, BILL also agrees to adjust the conversion rate for those who convert their Notes during specified conditions. The Notes can be redeemed by BILL in cash after December 1, 2027, provided the stock price sustains over a stipulated threshold.

Strategic Financial Transactions

As part of this offering and to support the Notes’ pricing, BILL has engaged in privately negotiated capped call transactions with financial institutions. These transactions aim to mitigate potential dilution of the common stock when the Notes are converted. Such preemptive measures are anticipated to enhance the overall market conditions around BILL’s shares.

In implementing these hedges, options counterparts may acquire shares of common stock and engage in derivatives linked to the stock. These actions could influence the market price of the common stock, affecting holders’ ability to convert their Notes. This activity signals BILL's commitment to managing its equity effectively as it navigates the funding landscape.

Upcoming Repurchase Settlements

Upcoming transactions related to repurchasing notes and shares are scheduled for settlement. On a recent date, BILL negotiated the repurchase of parts of the 2025 and 2027 Notes for approximately $539.4 million, reflecting their ongoing strategy of optimizing financial resources and improving their balance sheet.

These transactions indicate BILL's proactive stance in managing its capital structure strategically. By smartly navigating the bond market and leveraging stock buybacks, BILL is positioning itself for growth while ensuring shareholder value remains a top priority.

Frequently Asked Questions

What is the primary purpose of the Notes offering?

The offering aims to raise funds for general corporate purposes, including debt repayment and stock repurchases, thereby enhancing financial flexibility.

What are the key features of the Convertible Senior Notes?

They are senior unsecured commitments without regular interest payments, maturing in 2030, with a defined conversion rate into common stock.

How will the raised funds be utilized by BILL?

BILL plans to use the funds for repurchasing existing notes, enhancing working capital, and facilitating potential acquisitions.

What rights do holders of the Notes have?

Holders can require repurchases at principal value in the event of fundamental changes affecting BILL, thus providing them with security.

What impact do capped call transactions have?

These transactions help limit potential dilution of equity when the Notes are converted, protecting the interests of shareholders.

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