15 June 2023
Lumentum upsizes convertible notes offering from $500m to $525m
Lumentum Holdings Inc of San Jose, CA, USA (which designs and makes optical and photonic products for optical networks and lasers for industrial and consumer markets) has announced the pricing of its offering of $525m worth of convertible senior notes due 2029 in a private placement to qualified institutional buyers (pursuant to Rule 144A under the Securities Act of 1933, as amended).
The offering was increased from the previously announced $500m (or $575m if the initial purchasers exercise their option to purchase additional notes in full). Lumentum granted the initial purchasers of the notes a 13-day option to purchase up to an additional $78.75m of the notes. The sale of the notes to the initial purchasers is expected to settle on 16 June (subject to customary closing conditions), and is expected to result in net proceeds of about $520.1m (or $598.2m, if the initial purchasers fully exercise their option to purchase additional notes) after deducting the initial purchasers’ discount and estimated offering expenses payable by Lumentum.
The notes will be senior, unsecured obligations of Lumentum, and will bear interest at a rate of 1.50% per year, payable semi-annually in arrears on 15 June and 15 December of each year, beginning on 15 December 2023. The notes will mature on 15 December 2029, unless earlier converted, redeemed or repurchased.
Lumentum intends to (i) use about $132.8m of the net proceeds to repurchase about $125m of its 0.250% convertible senior notes due 2024, and (ii) purchase about $125m of its common stock, in each case concurrently with the pricing of the offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as its agent. Lumentum intends to use the remaining net proceeds for general corporate purposes, which may include the repayment or repurchase of its indebtedness, including any of its existing convertible notes, capital expenditures, working capital and potential acquisitions.
Holders of the 2024 notes that are repurchased in the concurrent repurchases may purchase shares of Lumentum’s common stock in the open market to unwind any hedge positions they may have with respect to the 2024 notes. These activities may affect the trading price of Lumentum’s common stock and the initial conversion price of the notes. Additionally, the concurrent repurchases of shares of common stock may result in the common stock trading at prices that are higher than would be the case in the absence of these repurchases.
The initial conversion rate for the notes is 14.3808 shares of Lumentum’s common stock per $1000 of notes (equivalent to an initial conversion price of about $69.54 per share) and is subject to adjustment upon the occurrence of certain events. Prior to the close of business on the business day immediately preceding 15 September 2029, the notes will be convertible at the option of the noteholders upon satisfaction of specified conditions and during certain periods. Thereafter, until the close of business on the second scheduled trading day preceding the maturity date, the notes will be convertible at the option of the noteholders at any time regardless of these conditions. Conversions of the notes will be settled in cash, shares of common stock or a combination of cash and shares of common stock, with the form of consideration at Lumentum’s election. The initial conversion price represents a premium of about 30% over the last reported sale price of Lumentum’s common stock on 13 June of $53.49 per share.
Lumentum may redeem for cash all or any portion of the notes, at its option (subject to certain limitations), on or after 22 June 2026, if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which Lumentum provides notice of redemption at a redemption price equal to 100% of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the notes.