Itron Announces $500.0 Million Convertible Senior Notes
Itron (NASDAQ: ITRI) announced a private offering of $500 million in convertible senior notes due 2030 to qualified institutional buyers under Rule 144A. The offering includes an option to purchase an additional $75 million in notes. The proceeds will fund capped call transactions to mitigate stock dilution and repurchase up to $100 million of its common stock. Remaining funds may repay existing debts or support potential acquisitions. The notes are not registered under the Securities Act and cannot be publicly traded without registration or exemption.
- Itron aims to raise $500 million through convertible senior notes, enhancing liquidity.
- Option to purchase an additional $75 million increases potential capital.
- Capped call transactions expected to reduce stock dilution impacts.
- Up to $100 million allocated for repurchasing common stock, potentially increasing stock price.
- Funds may repay 0% convertible senior notes due 2026, improving financial stability.
- Proceeds can support strategic acquisitions or business expansions.
- Convertible notes may lead to stock dilution upon conversion.
- Reliance on market conditions introduces uncertainty in the offering's success.
- Unspecified terms of the notes (interest rate, conversion rate) create investor uncertainty.
- Funds allocated for repurchasing stock and debt repayment may not result in significant long-term growth.
- Potential market impact from capped call transactions and derivative activities.
Insights
Itron's recent announcement regarding the offering of
The introduction of capped call transactions is a hedging strategy aimed at reducing potential dilution of the company's common stock. This is particularly relevant for existing shareholders as it helps maintain the value of their shares. However, it's essential to note the complexity and risks associated with derivative transactions, which could create volatility in the stock price.
The company plans to use a portion of the proceeds to repurchase up to
A portion of the proceeds may also be used to repay existing debt, specifically the 0.00% Convertible Senior Notes due 2026. This would extend the company's debt maturity timeline, potentially improving liquidity and financial flexibility. However, leveraging up with debt can increase financial risk if the company faces economic downturns or operational challenges.
In summary, while the offering could be seen as a strategic move to manage debt and enhance shareholder value, investors should be cautious about the associated risks, notably with the hedging activities and increased debt load.
The specified use of proceeds from the convertible notes offering touches on several key areas. Firstly, the authorization for up to
Convertible notes generally appeal to institutions due to their hybrid nature, offering both debt and equity components. As such, the market reception will likely reflect confidence in Itron's future performance and creditworthiness. The terms of the notes, including the interest rate and conversion price, will be critical to determine how attractive these notes are to investors and the potential dilution impact on existing shareholders.
However, the specific inclusion of capped call transactions adds a layer of complexity. These transactions are designed to limit dilution but may introduce volatility depending on the actions of the counterparties involved. Investors should watch how these instruments perform, particularly during periods of stock price fluctuations.
Furthermore, the company's indication that proceeds may be used for undisclosed strategic transactions or acquisitions introduces an element of uncertainty. While such moves could drive growth and diversification, they carry inherent risks regarding integration and execution.
Overall, while the convertible notes offering and associated strategies could potentially enhance shareholder value and strategic positioning, they come with significant risks that investors should carefully consider.
LIBERTY LAKE, Wash., June 17, 2024 (GLOBE NEWSWIRE) -- Itron, Inc. (NASDAQ: ITRI) (the “Company”), which is innovating new ways for utilities and cities to manage energy and water, today announced that it intends to commence a private offering, subject to market and other conditions, of
The terms of the Notes, including the interest rate, initial conversion rate and other terms, will be determined at the pricing of the offering.
In connection with the pricing of the Notes, the Company expects to enter into privately negotiated capped call transactions with one or more of the initial purchasers or their affiliates and/or other financial institutions (the “Capped Call Counterparties”). The capped call transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the Notes and/or offset any cash payments it is required to make in excess of the principal amount of converted Notes, as the case may be, in the event that the market price of the common stock is greater than the strike price of the capped call transactions, with such reduction and/or offset subject to a cap. If the initial purchasers exercise their option to purchase additional Notes, the Company may enter into additional capped call transactions with the Capped Call Counterparties.
The Company expects that, in connection with establishing their initial hedge of the capped call transactions, the Capped Call Counterparties or their respective affiliates may enter into various derivative transactions with respect to the common stock concurrently with, or shortly after, the pricing of the Notes, and may unwind these various derivative transactions and purchase shares of common stock in open market transactions shortly after the pricing of the Notes. These activities could increase (or reduce the size of any decrease in) the market price of the common stock or the Notes at that time. In addition, the Company expects that the Capped Call Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding derivative transactions with respect to the common stock and/or by purchasing or selling shares of the common stock or other securities of the Company in secondary market transactions following the pricing of the Notes and prior to the maturity date of the Notes (and (i) are likely to do so during any observation period related to a conversion of Notes or following redemption of the Notes by the Company or following any repurchase of the Notes by the Company in connection with any fundamental change and (ii) are likely to do so following any repurchase of the Notes by the Company other than in connection with any such redemption or fundamental change if the Company elects to unwind a corresponding portion of the capped call transactions in connection with such repurchase). This activity could also cause or avoid an increase or a decrease in the market price of the common stock or the Notes, which could affect the ability of noteholders to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of the Notes, could affect the amount and value of the consideration that noteholders will receive upon conversion of the Notes.
The Company intends to use a portion of the net proceeds from the offering to pay the cost of the capped call transactions described above. The Company also intends to use up to approximately
The Notes will be offered to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act. The Notes have not been, and will not be, registered under the Securities Act, or the securities laws of any state or other jurisdiction, and, unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the Notes and shall not constitute an offer, solicitation or sale in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration and qualification under the securities laws of such state or jurisdiction.
About Itron
Itron is a proven global leader in energy, water, smart city, IIoT and intelligent infrastructure services. For utilities, cities and society, we build innovative systems, create new efficiencies, connect communities, encourage conservation and increase resourcefulness. By safeguarding our invaluable natural resources today and tomorrow, we improve the quality of life for people around the world.
Itron® is a registered trademark of Itron, Inc. All third-party trademarks are property of their respective owners and any usage herein does not suggest or imply any relationship between Itron and the third party unless expressly stated.
Cautionary Note Regarding Forward Looking Statements
This release contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical factors nor assurances of future performance. These statements are based on our expectations about, among others, revenues, operations, financial performance, earnings, liquidity, earnings per share, cash flows and restructuring activities including headcount reductions and other cost savings initiatives. This document reflects our current strategy, plans and expectations and is based on information currently available as of the date of this release. When we use words such as “expect”, “intend”, “anticipate”, “believe”, “plan”, “goal”, “seek”, “project”, “estimate”, “future”, “strategy”, “objective”, “may”, “likely”, “should”, “will”, “will continue”, and similar expressions, including related to future periods, they are intended to identify forward-looking statements. Forward-looking statements rely on a number of assumptions and estimates. Although we believe the estimates and assumptions upon which these forward-looking statements are based are reasonable, any of these estimates or assumptions could prove to be inaccurate and the forward-looking statements based on these estimates and assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors. Therefore, you should not rely on any of these forward-looking statements. Some of the factors that we believe could affect our results include our ability to execute on our restructuring plan, our ability to achieve estimated cost savings, the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, adverse impacts of litigation, changes in laws and regulations, our dependence on new product development and intellectual property, future acquisitions, changes in estimates for stock-based and bonus compensation, increasing volatility in foreign exchange rates, international business risks, uncertainties caused by adverse economic conditions, including, the factors that are more fully described in Part I, Item 1A: Risk Factors included in our latest Annual Report on Form 10-K filed with the SEC. Itron undertakes no obligation to update or revise any information in this press release.
For additional information, contact:
Itron, Inc.
Paul Vincent
Vice President, Investor Relations
512-560-1172
David Means
Director, Investor Relations
737-242-8448
Investors@itron.com
FAQ
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