BlackLine, Inc. Announces Upsize and Pricing of Offering of $600,000,000 of Convertible Senior Notes
BlackLine announced an upsized and priced offering of $600 million in 1.00% convertible senior notes due 2029, up from $500 million. The notes are convertible into cash or BlackLine common stock and will be privately placed to qualified buyers. The proceeds, expected to be $588.3 million, will be used to repurchase $919.8 million of 2026 notes and for capped call transactions to reduce stock dilution. The notes bear a 1.00% interest rate, payable semi-annually, and mature in 2029. The conversion price is set at $68.47 per share, a 30% premium over the last share price. The sale closes on May 24, 2024.
- BlackLine upsized its offering from $500 million to $600 million, indicating strong demand.
- The notes bear a low-interest rate of 1.00%, reducing interest expense.
- The conversion price is set at a 30% premium over the last share price, reflecting investor confidence.
- Proceeds will be used to repurchase $919.8 million of 2026 notes, reducing future liabilities.
- Capped call transactions are designed to minimize potential stock dilution.
- Issuing $600 million in senior notes increases BlackLine's debt burden.
- Only $588.3 million net proceeds from the offering, after expenses.
- Repurchasing $919.8 million of 2026 notes with $535.2 million net proceeds and cash on hand indicates a financial stretch.
- Convertible notes can result in stock dilution if converted to shares.
Insights
The announcement of BlackLine's $600 million offering of convertible senior notes at an initial 1.00% interest rate is a strategic move aimed at managing its debt structure. By upsizing the offering from an initial $500 million, BlackLine shows strong investor demand, which can be seen as a vote of confidence in the company’s financial health. The conversion price of $68.47 per share reflects a 30% premium over the last reported sale price, indicating optimism about future stock price appreciation.
One significant use of the proceeds is to repurchase $535.2 million of the existing 0.00% Convertible Senior Notes due 2026. This repurchase, at a discounted aggregate price of $848.5 million, implies a savings on the interest expense and a more manageable debt timeline moving forward. However, the company is increasing its overall debt, which could pose a risk if market conditions or the company’s financial performance deteriorates.
The capped call transactions are designed to mitigate potential dilution from the convertible notes conversion, an investor-friendly move that can help maintain shareholder value. The adjustable cap of $92.17 represents a substantial premium (75%) over the current stock price, suggesting strong confidence in long-term growth potential.
From a market perspective, BlackLine’s move to offer convertible senior notes can have both positive and negative implications. The increase in principal amount indicates robust demand, which is a positive signal for the company’s market perception. This demand could result in a temporary rise in BlackLine’s stock price as hedge funds and other participants adjust their positions in response to the capped call transactions and the repurchase of the 2026 Notes.
However, the issuance of new debt to replace existing debt may be interpreted cautiously. Such refinancing could indicate that while the company is managing its liabilities effectively in the short-term, it is also extending its debt obligations into the future. Investors need to be aware of the potential impact of new debt on the company’s balance sheet and future cash flow.
The capped call transactions, meant to reduce dilution risk, add a layer of complexity to the stock's performance. These hedging activities might lead to fluctuations in the stock price, especially during key periods such as the unwinding of these positions. Hence, investors should be prepared for potential volatility in the near term.
Overall, while the offering indicates confidence and strategic debt management, it also introduces elements of risk and volatility that must be carefully monitored.
LOS ANGELES, May 22, 2024 (GLOBE NEWSWIRE) -- BlackLine, Inc. (Nasdaq: BL), today announced the pricing of
The notes will be senior unsecured obligations of BlackLine. The notes will bear interest at a rate of
BlackLine may redeem the notes, at its option, on or after June 5, 2027 if (i) the notes are “freely tradable” (as defined in the indenture governing the notes) and any accrued and unpaid additional interest has been paid as of the date BlackLine sends the related redemption notice and (ii) the last reported sale price of BlackLine’s common stock has been at least
If a “fundamental change” (as defined in the indenture governing the notes) occurs at any time prior to the maturity date, holders of the notes may require BlackLine to repurchase for cash all or any portion of their notes at a repurchase price equal to
BlackLine estimates that the net proceeds from the offering will be approximately
In connection with the pricing of the notes, BlackLine entered into capped call transactions with the initial purchaser and/or its affiliates and/or other financial counterparties (the “option counterparties”). The capped call transactions are expected generally to reduce potential dilution to BlackLine’s common stock upon any conversion of notes and/or offset any cash payments BlackLine is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap initially equal to approximately
BlackLine expects that, in connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates may enter into various derivative transactions with respect to BlackLine’s common stock and/or purchase shares of BlackLine’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 BlackLine’s common stock or the notes at that time.
In addition, BlackLine expects that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to BlackLine’s common stock and/or purchasing or selling BlackLine’s common stock or other securities of BlackLine in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so (x) during any observation period related to a conversion of the notes or following any redemption or fundamental change repurchase of the notes, (y) following any other repurchase of the notes if BlackLine unwinds a corresponding portion of the capped call transactions in connection with such repurchase and (z) if BlackLine otherwise unwinds all or a portion of the capped call transactions). This activity could also cause or prevent an increase or a decrease in the market price of BlackLine’s common stock or the notes, and to the extent the activity occurs during any observation period related to a conversion of notes, this could affect the value of the consideration that a noteholder will receive upon conversion of its notes. If any capped call transactions fail to become effective, whether or not the offering of the notes is completed, the option counterparties (or their respective affiliates) may unwind their hedge positions with respect to BlackLine’s common stock, which could adversely affect the price of BlackLine’s common stock and, if the notes have been issued, the value of the notes.
BlackLine also expects in connection with the repurchase of a portion of its 2026 Notes, those holders of the 2026 Notes that sell their 2026 Notes to BlackLine may enter into or unwind various derivatives with respect to BlackLine’s common stock and/or purchase shares of BlackLine’s common stock concurrently with or shortly after the pricing of the notes. In particular, BlackLine expects that many holders of the 2026 Notes employ a convertible arbitrage strategy with respect to the 2026 Notes and have a short position with respect to BlackLine’s common stock that they would close, through purchases of BlackLine’s common stock, in connection with BlackLine’s repurchase of the 2026 Notes. This activity could increase (or reduce the size of any decrease in) the market price of BlackLine’s common stock, which may also affect the trading price of the notes at that time, and could result in a higher effective conversion price for the notes.
In connection with the issuance of its 2026 Notes and its
Neither the notes, nor any shares of BlackLine’s common stock potentially issuable upon conversion of the notes, have been, nor will be, registered under the Securities Act or any state securities laws and, unless so registered, such securities may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.
This press release is neither an offer to sell nor a solicitation of an offer to buy any securities, nor shall it constitute an offer, solicitation or sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.
Media Contact:
Ashley Dyer
Ashley.dyer@blackline.com
Investor Relations Contact:
Matt Humphries
Matt.humphries@blackline.com
FAQ
What is the total amount of BlackLine's convertible senior notes offering?
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When will BlackLine's offering of convertible senior notes close?
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How will BlackLine use the proceeds from the $600 million notes offering?
