Heritage Insurance Holdings Inc. plans to offer $125 million of convertible senior notes due 2037 in a private offering to qualified institutional buyers.
The company expects to grant the initial purchaser for the offering an option to buy up to an additional $18.8 million of notes.
The notes will be senior unsecured obligations of the company and will be guaranteed on a senior unsecured basis by Heritage MGA LLC, a wholly owned subsidiary of the company and managing general agent that manages substantially all aspects of the business of the company's Florida insurance subsidiary.
The company will have the option to redeem all or any portion of the notes on or after Aug. 5, 2022, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest to but excluding the redemption date. In addition, if Heritage Insurance's acquisition of NBIC Holdings Inc. does not close before June 8, 2018, or if the agreement is terminated, the company may redeem all the notes at a redemption price equal to 101% of their principal amount, plus accrued and unpaid interest to but excluding the redemption date, plus 75% of the excess, if any, of the notes' conversion value at the time of redemption over their initial conversion value.
Heritage Insurance expects to use the net proceeds from the sale of the notes to buy back up to $40 million of its common stock and to fund the cash portion of the NBIC acquisition. The offering is not conditioned on the closing of the deal, which should take place after the offering closes. If the deal does not close, the rest of the net proceeds will be used to fund the redemption of the notes if the company chooses or for general corporate purposes.
The share repurchases would occur in privately negotiated transactions effected with or through the initial purchaser or its affiliate. The company expects to buy back such shares from purchasers of notes in the offering at a purchase price per share equal to the company's closing share price on the date the offering prices.