ATEC Announces Proposed Convertible Senior Notes Offering

Rhea-AI Summary

Alphatec Holdings (ATEC) has announced plans to offer $300 million in convertible senior notes due 2030 to qualified institutional buyers, with an option for purchasers to buy an additional $50 million. The notes will be senior, unsecured obligations with semi-annual interest payments.

The notes will be convertible into cash, ATEC common stock, or a combination thereof. Conversion rights activate upon certain events before September 17, 2029, and at any time thereafter until maturity. ATEC can redeem the notes after March 20, 2028, if stock price conditions are met.

The company plans to enter into capped call transactions to reduce potential dilution. Proceeds will be used to: (1) fund capped call transactions, (2) repurchase a portion of existing 0.75% convertible notes due 2026, and (3) general corporate purposes.

Positive

• Strengthens cash position through $300M capital raise
• Capped call structure helps minimize potential dilution
• Opportunity to refinance existing 2026 notes

Negative

• Potential shareholder dilution if notes are converted to common stock
• Increased long-term debt obligation of $300M
• Additional interest payment obligations

Insights

Financial Analyst

ATEC's proposed $300 million convertible notes offering (potentially $350 million with the overallotment) represents a significant capital markets transaction relative to the company's $1.75 billion market capitalization. The 2030 maturity date extends the company's debt profile while the concurrent repurchase of their 2026 notes demonstrates proactive liability management.

The capped call transactions are particularly noteworthy as they're designed to reduce potential dilution from the notes' conversion feature. These derivative instruments effectively raise the conversion premium, creating a more shareholder-friendly structure than a straight convertible offering would provide. However, these hedging arrangements consume a portion of the capital raised, reducing net proceeds available for operations.

The transaction details reveal standard convertible note features including conditional conversion rights, redemption provisions (triggered if ATEC's share price exceeds 130% of the conversion price after March 2028), and fundamental change repurchase requirements. This structure provides ATEC with lower-cost capital than straight debt would offer, while giving noteholders potential equity upside.

The market should expect some technical pressure on ATEC shares from the described hedging activities as option counterparties establish and manage their positions. Long-term impact will depend on how effectively management deploys the capital raised beyond the refinancing activities explicitly mentioned.

Medical Technology Financial Analyst

This financing transaction strengthens ATEC's balance sheet at a critical juncture in the competitive spine surgery market. As a provider of innovative spine surgery solutions, ATEC operates in a capital-intensive segment where maintaining adequate funding for R&D, commercial expansion, and marketing initiatives is essential for market share growth.

The spine surgery sector requires substantial ongoing investment to develop differentiated products and expand clinical applications. While not explicitly stated, the "general corporate purposes" portion of the proceeds likely targets these strategic priorities. Companies gaining momentum in specialized surgical markets often need significant capital to capitalize on their innovation pipeline.

The convertible structure typically provides lower interest costs than straight debt, preserving cash flow for operational needs. Meanwhile, the liability management aspect of repurchasing existing 2026 notes suggests the company is taking advantage of market conditions to optimize its capital structure rather than addressing any urgent refinancing needs.

For investors evaluating ATEC's competitive position, this transaction should be viewed in context of the spine market's competitive dynamics, where scale and commercial reach increasingly determine winners. The additional financial flexibility could accelerate ATEC's strategic initiatives, though execution risk remains in efficiently deploying this capital for appropriate returns on investment.

CARLSBAD, Calif.--(BUSINESS WIRE)-- Alphatec Holdings, Inc. (Nasdaq: ATEC), a provider of innovative solutions dedicated to revolutionizing the approach to spine surgery, today announced its intention to offer, subject to market and other conditions, $300,000,000 aggregate principal amount of convertible senior notes due 2030 (the “notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). ATEC also expects to grant the initial purchasers of the notes an option to purchase, for settlement within a period of 13 days from, and including, the date the notes are first issued, up to an additional $50,000,000 principal amount of notes.

The notes will be senior, unsecured obligations of ATEC, will accrue interest payable semi-annually in arrears and will mature on March 15, 2030, unless earlier repurchased, redeemed or converted. Before September 17, 2029, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after September 17, 2029, noteholders may convert their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. ATEC will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at ATEC’s election, subject to certain restrictions. The notes will be redeemable, in whole or in part (subject to certain limitations), for cash at ATEC’s option at any time, and from time to time, on or after March 20, 2028 and on or before the 60th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of ATEC’s common stock exceeds 130% of the conversion price for a specified period of time and certain other conditions are satisfied. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If certain events that constitute a “fundamental change” occur, then, subject to a limited exception, noteholders may require ATEC to repurchase their notes at a cash repurchase price equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. The final terms of the notes, including the interest rate, initial conversion rate and certain other terms of the notes, will be determined at the pricing of the offering.

In connection with the pricing of the notes, ATEC expects to enter into one or more privately negotiated capped call transactions with one or more of the initial purchasers of the notes and/or their respective affiliates and/or other financial institutions (in this capacity, the “option counterparties”). The capped call transactions are expected generally to reduce the potential dilution to ATEC’s common stock upon any conversion of the notes and/or offset any cash payments ATEC is required to make in excess of the principal amount of the converted notes, as the case may be, with such reduction and/or offset subject to a cap. If the initial purchasers of the notes exercise their option to purchase additional notes, ATEC expects to enter into additional capped call transactions with the option counterparties.

ATEC has been advised that, in connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates expect to enter into various derivative transactions with respect to ATEC’s common stock and/or purchase shares of ATEC’s common stock concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of ATEC’s common stock or the notes at that time.

In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to ATEC’s common stock and/or purchasing or selling shares of ATEC’s common stock or other of ATEC’s securities in secondary market transactions following the pricing of the notes and from time to time prior to the maturity of the notes (and are likely to do so following any conversion of the notes, any repurchase of the notes by ATEC on any fundamental change repurchase date, any redemption date or any other date on which the notes are retired by ATEC, in each case if ATEC exercises the relevant election under the capped call transactions where such termination is at ATEC’s option). This activity could also cause or avoid an increase or a decrease in the market price of ATEC’s common stock or the notes, which could affect the ability of holders of the notes to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of notes, it could affect the number of shares of ATEC’s common stock and value of the consideration that holders of notes will receive upon conversion of such notes.

ATEC intends to use (i) a portion of the net proceeds from the offering to fund the cost of entering into the capped call transactions; (ii) a portion of the net proceeds from the offering to repurchase and cancel a portion of its outstanding 0.75% convertible senior notes due 2026 (the “2026 notes”) in privately negotiated transactions concurrently with the pricing of the offering; and (iii) the remainder of the net proceeds from the offering for general corporate purposes. If the initial purchasers exercise their option to purchase additional notes, then ATEC intends to use a portion of the additional net proceeds to fund the cost of entering into additional capped call transactions.

Holders of the 2026 notes that are repurchased in the concurrent repurchases described above may purchase shares of ATEC’s common stock in the open market to unwind any hedge positions they may have with respect to the 2026 notes. These activities may affect the trading price of ATEC’s common stock and, if conducted concurrently with the offering, may result in a higher initial conversion price for the notes ATEC is offering.

The notes will be offered only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. The offer and sale of the notes and any shares of common stock issuable upon conversion of the notes have not been, and will not be, registered under the Securities Act or any other securities laws, and the notes and any such shares cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the notes or any shares of common stock issuable upon conversion of the notes, nor will there be any sale of the notes or any such shares, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.

About ATEC

ATEC, through its wholly owned subsidiaries, Alphatec Spine, Inc., EOS imaging S.A.S. and SafeOp Surgical, Inc., is a medical device company dedicated to revolutionizing the approach to spine surgery through clinical distinction. ATEC’s Organic Innovation Machine^TM is focused on developing new approaches that integrate seamlessly with the Company’s expanding AlphaInformatiX Platform to better inform surgery and more safely and reproducibly achieve the goals of spine surgery. ATEC’s vision is to become the Standard Bearer in Spine.

Special Note on Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the anticipated terms of the notes being offered, the completion, timing and size of the proposed offering, the intended use of the net proceeds, the anticipated terms of, and the effects of entering into, the capped call transactions described above and the actions of the option counterparties and their respective affiliates and the anticipated terms of, and the effects of entering into, the repurchases of 2026 notes described above. These statements reflect ATEC’s current beliefs and are based upon information currently available to it. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause ATEC’s actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties, factors and contingencies include, but are not limited to: market conditions, including market interest rates, the trading price and volatility of ATEC’s common stock and risks relating to ATEC’s business, including those described in periodic reports that ATEC files from time to time with the Securities and Exchange Commission. ATEC may not consummate the proposed offering described in this press release and, if the proposed offering is consummated, cannot provide any assurances regarding the final terms of the offer or the notes or its ability to effectively apply the net proceeds as described above. All information in this release is as of the date hereof, and ATEC undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in ATEC’s expectations, except as may be required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250303198116/en/

Investor/Media Contact:

Tina Jacobsen, CFA

Investor Relations

(760) 494-6790

investorrelations@atecspine.com

Company Contact:

J. Todd Koning

Chief Financial Officer

Alphatec Holdings, Inc.

investorrelations@atecspine.com

Source: Alphatec Holdings, Inc.

FAQ

What is the size of ATEC's 2030 convertible notes offering?

$300 million with an additional $50 million option for initial purchasers

When can ATEC's 2030 convertible notes be converted to common stock?

Upon certain events before September 17, 2029, and freely thereafter until maturity

How is ATEC protecting against share dilution from the convertible notes?

Through capped call transactions with initial purchasers and/or financial institutions

What will ATEC use the convertible notes proceeds for?

To fund capped calls, repurchase existing 2026 notes, and for general corporate purposes

When can ATEC redeem the 2030 convertible notes?

After March 20, 2028, if stock price exceeds 130% of conversion price for a specified period