18 November 2022
Wolfspeed prices private offering of convertible senior notes to raise $1.525bn
Wolfspeed Inc of Durham, NC, USA – which makes silicon carbide materials as well as silicon carbide (SiC) and gallium nitride (GaN) power-switching & RF semiconductor devices – has announced the pricing of its private offering of convertible senior notes due 2029 (announced on 16 November) to raise $1525m.
The notes are unsecured, senior obligations of Wolfspeed, bearing interest at a rate of 1.875% per year, payable semi-annually in arrears on 1 June and 1 December of each year (beginning on 1 June 2023). The notes will mature on 1 December 2029, unless earlier repurchased, redeemed or converted.
The initial conversion rate is 8.4118 shares of Wolfspeed’s common stock per $1000 of notes (equivalent to an initial conversion price of about $118.88 per share). Conversions will be settled in cash, shares of Wolfspeed’s common stock or a combination thereof, at Wolfspeed’s election. The initial conversion price represents a conversion premium of about 35% over the last reported sale price of $88.06 per share on the New York Stock Exchange on 16 November.
The size of the private offering was increased from the initial $1300m. In addition, Wolfspeed has granted the initial purchasers an option to purchase (for settlement within a 13-day period from, and including, the date on which the notes are first issued) up to an additional $225m of the notes.
Subject to the satisfaction of customary closing conditions, the sale of the notes to the initial purchasers is expected to settle on 21 November, and result in net proceeds of about $1497.5m (or $1718.6m, if the initial purchasers exercise their option to purchase additional notes in full) after deducting the initial purchasers’ discount and estimated offering expenses payable by Wolfspeed.
Wolfspeed intends to use about $238.7m of the net proceeds to fund the cost of entering into privately negotiated capped call transactions. The remainder will be used for general corporate purposes. If the initial purchasers exercise their option to purchase additional notes, then Wolfspeed intends to use part of the additional net proceeds to fund the cost of entering into additional capped call transactions.
The cap price of the capped call transactions will initially be $202.5380 per share (a premium of 130% over the last reported sale price of $88.06 per share) and is subject to certain adjustments under the terms of the capped call transactions.
The capped call transactions are expected generally to reduce the potential dilution to Wolfspeed’s common stock upon any conversion of the notes and/or offset any potential cash payments that Wolfspeed is required to make in excess of the principal amount of the converted notes, as the case may be, upon conversion of the notes. If, however, the market price per share of Wolfspeed’s common stock (as measured under the terms of the capped call transactions) exceeds the cap price of the capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions.