Q2 Holdings Inc. announced the pricing of an offering of $200 million of convertible senior notes due 2023 in a private placement.
The company granted the initial purchasers an option to purchase up to an additional $30 million of the notes.
The notes will be unsecured, unsubordinated obligations of the company and will pay interest semiannually at an annual rate of 0.75% and will be convertible into cash, shares of the company's common stock or a combination of cash and shares.
The notes have an initial conversion rate of 17.4292 common shares per $1,000 principal amount of notes, equivalent to an initial conversion price of approximately $57.38 per share, representing an initial conversion premium of approximately 27.5% above Q2's Feb. 21 closing stock price of $45.00 per share.
The company expects to close the offering on or about Feb. 26, subject to customary closing conditions.
In connection with the offering, Q2 entered into privately negotiated convertible note hedge transactions with one or more financial institutions, which included one or more of the initial purchasers and/or their respective affiliates.The convertible note hedge transactions cover, subject to anti-dilution adjustments, the number of common shares underlying the convertible notes sold in the offering.
The company also entered privately negotiated warrant transactions with the option counterparties whereby it sold warrants to purchase up to the same number of Q2's common shares with an initial strike price of approximately $78.75 per share, subject to certain adjustments.
Q2 expects to receive net proceeds from the offering of about $193.8 million, or about $223 million if the initial purchasers exercise their option to purchase additional notes in full. The company intends to use $16.8 million of the net proceeds to pay the cost of the convertible note hedge transactions, and the remainder for general corporate purposes, including working capital, capital expenditures, potential acquisitions and strategic transactions.
If the initial purchasers exercise their option to purchase additional notes, the company plans to use a portion of the net proceeds to fund the cost of entering into additional convertible note hedge transactions. Any remaining net proceeds from the sale of additional notes will be used for general corporate purposes.