Granite Construction Incorporated Announces Redemption of Outstanding 2.75% Convertible Senior Notes due 2024
Granite Construction announced the full redemption of its outstanding 2.75% Convertible Senior Notes due 2024. The redemption will occur on August 19, 2024, with a cash payment of 100% of the principal amount plus accrued interest. Convertible Notes can be converted into Granite's common stock at an increased conversion rate until August 15, 2024. Granite will settle conversions with cash up to the principal amount and deliver shares for any excess. The company plans to unwind related hedge and warrant transactions, potentially impacting its stock price due to concurrent derivative activities by counterparties.
- The redemption provides clarity on Granite's debt obligation, eliminating future interest payments.
- Granite's decision to settle conversions with cash and shares may maintain a balanced equity structure.
- The increased conversion rate might attract more conversions, reducing debt load through equity.
- The redemption obligation requires significant cash outlay, impacting short-term liquidity.
- Potential stock price volatility due to hedge and warrant transactions by counterparties.
- Unwinding convertible note hedge and warrant transactions may lead to dilution with the issuance of new shares.
Insights
Granite Construction's announcement of redeeming its 2.75% convertible senior notes due 2024 has several implications for its financial standing. The redemption will be executed at 100% of the principal amount, plus accrued interest. This move may signal the company's strong cash position, as redeeming debt early often requires a significant cash outlay. Removal of these notes from the balance sheet will reduce their long-term liabilities, potentially strengthening their financial statements. Additionally, holders of the notes have the option to convert them into 31.7915 shares of Granite's common stock per
Short-term: The immediate financial outflow could impact liquidity but showcases strong cash reserves.
Long-term: Reduction in debt can improve financial health and attractiveness to investors, despite potential share dilution.
The redemption of convertible notes and the subsequent Unwind Transactions could have varying impacts on the stock price of Granite Construction. The company's engagement in convertible note hedge and warrant transactions with financial institutions will see a corresponding unwind, which could lead to an increase in trading activity around Granite's common stock. As these counterparties potentially engage in buying or selling Granite's stock to hedge their positions, this could introduce volatility in the stock price. The redemption itself is likely to be perceived positively as it indicates a proactive approach by management towards managing their financial obligations. However, the market will also closely watch how the unwind activities affect the stock price in the short term.
Short-term: Potential for increased stock price volatility due to unwind transactions by counterparties.
Long-term: Positive market perception owing to proactive debt management and potential financial stability.
The redemption of convertible notes involves several legal mechanisms and compliance with the indenture terms. The increase in the conversion rate and the details of the unwind transactions must adhere to the contractual obligations set in the initial terms of the convertible notes and hedge transactions. Legal complexities also arise in ensuring timely notifications and processing for certificate holders and those holding through the Depository Trust Company (DTC). The involvement of Wilmington Trust as a paying agent signifies a structured approach to handle redemptions efficiently. From a legal standpoint, this redemption shows thorough due diligence and risk mitigation, ensuring all stakeholders are informed and the process adheres to regulatory standards.
Short-term: Ensures compliance and smooth processing of redemptions, mitigating legal risks.
Long-term: Reflects strong governance and can build investor confidence in the company's adherence to financial and legal standards.
The redemption price will be an amount in cash equal to
To receive payment of the Redemption Price, any certificated Convertible Notes and any other required documents must be surrendered to Wilmington Trust, National Association, as paying agent, on or prior to the Redemption Date. Convertible Notes held through the Depository Trust Company (“DTC”) should be presented for redemption in accordance with the applicable procedures of DTC.
Convertible Notes called for redemption may be converted at the election of the applicable holder at any time before the close of business on August 15, 2024.
As a result of sending the notice of redemption, the current conversion rate has been increased for all conversions of Convertible Notes on or after today and through the close of business on August 15, 2024 by 0.0139 shares. The conversion rate (including the additional shares) for all conversions of Convertible Notes on or after today and through the close of business on August 15, 2024 is 31.7915 shares of Granite’s common stock per
Granite has elected to settle conversions of Convertible Notes on or after today and through the close of business on August 15, 2024 by paying cash up to the aggregate principal amount of the Convertible Notes to be converted and delivering shares of Granite’s common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.
In connection with the issuance of the Convertible Notes, Granite entered into convertible note hedge transactions (the “existing convertible note hedge transactions”) with certain financial institutions (the “existing counterparties”), and Granite also entered into separate warrant transactions (the “existing warrant transactions”) with the existing counterparties. To the extent Granite redeems any Convertible Notes, Granite intends to unwind a corresponding portion of the existing convertible note hedge transactions and a corresponding portion of the existing warrant transactions (collectively, the “Unwind Transactions”). In connection with the Unwind Transactions, Granite expects to enter into agreements with the existing counterparties and receive a number of shares of Granite’s common stock (and cash in lieu of any fractional shares) in respect of the unwind of the portion of the existing convertible note hedge transactions that correspond to Convertible Notes redeemed and make payments in cash or issue shares of Granite’s common stock in respect of the unwind of the portion of the existing warrant transactions that correspond to the Convertible Notes redeemed.
In connection with the Unwind Transactions, the existing counterparties and/or their respective affiliates may enter into or unwind various derivative transactions with respect to Granite’s common stock and/or purchase or sell shares of Granite’s common stock or other securities of Granite in secondary market transactions concurrently with or shortly after the redemption of the Convertible Notes. This activity may affect the price of Granite’s common stock.
Forward-looking Statements
Any statements contained in this news release that are not based on historical facts, including statements about the redemption of the Convertible Notes, the Unwind Transactions, third parties entering into or unwinding derivative transactions with respect to Granite’s common stock and/or purchasing or selling Granite’s common stock, and the potential impact of the foregoing on the market price of Granite’s common stock, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “expects,” “estimates,” “intends,” “plans,” “potential,” “may,” “will,” “could,” “would” and the negatives thereof or other comparable terminology or by the context in which they are made. These forward-looking statements are predictions reflecting the best judgment of senior management and reflect our current expectations regarding the redemption of the Convertible Notes, the Unwind Transactions, third parties entering into or unwinding derivative transactions with respect to Granite’s common stock and/or purchasing or selling Granite’s common stock, and the potential impact of the foregoing on the market price of Granite’s common stock. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or predictions that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, the risks related to the anticipated terms of, and the effects of entering into, the Unwind Transactions and third parties entering into or unwinding derivative transactions with respect to Granite’s common stock and/or purchasing or selling Granite’s common stock, market and general conditions, and those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this news release and, except as required by law; we undertake no obligation to revise or update any forward-looking statements for any reason.
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Source: Granite Construction Incorporated
FAQ
What is the redemption date for Granite Construction's 2.75% Convertible Senior Notes due 2024?
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When can holders convert their Granite Convertible Senior Notes into common stock?
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What impact might the unwinding of hedge and warrant transactions have on Granite's stock?
