REPAY Closes Offering of $287.5 Million of 2.875% Convertible Notes

Rhea-AI Summary

Repay Holdings (NASDAQ: RPAY) announced the successful closing of its $287.5 million offering of 2.875% convertible senior notes due 2029. This includes a $27.5 million option exercised by the initial purchasers. The proceeds will address $220 million of the company's 2026 maturities, fund capped call transactions, and repurchase 3.9 million shares, aiming to minimize shareholder dilution. The initial conversion price is approximately $13.02 per share, with a capped call price at $20.42. The interest rate is 2.875% per annum, payable semiannually, starting January 15, 2025.

Positive

• Successful closing of $287.5 million convertible senior notes.
• Addresses $220 million principal amount of 2026 maturities.
• Repurchase of approximately 3.9 million shares to reduce potential dilution.
• Convertible notes have a 2.875% interest rate, payable semiannually.
• Initial conversion price set at approximately $13.02 per share, a 27.5% premium.

Negative

• Convertible notes increase the company's debt.

Insights

Financial Analyst

Repay Holdings Corporation's recent convertible notes offering of $287.5 million is a noteworthy development for those invested in the company. This move signifies a strategic financial maneuver to address the company's existing debt and enhance its liquidity position. Converting the notes at an interest rate of 2.875% until 2029 provides a relatively low-cost debt option, which is beneficial in a rising interest rate environment.

The initial conversion price set at $13.02 per share reflects a premium of approximately 27.5% over the closing price on July 2, 2024. This indicates the company's confidence in its future share price appreciation. Importantly, the capped call transactions, which effectively cap the conversion price at $20.42, are designed to mitigate the dilutive effect of the convertible notes. This approach aligns with the company's goal to minimize shareholder dilution, which is a positive strategy for existing shareholders.

Repurchasing $220.0 million of 2026 convertible senior notes and 3.9 million shares of common stock using the proceeds demonstrates proactive balance sheet management. By addressing the 2026 debt maturities ahead of time, the company reduces refinancing risks and enhances financial stability, positioning itself well for profitable growth and future investments.

Market Research Analyst

Repay Holdings is strategically utilizing its convertible notes offering to strengthen its market position. With a significant portion of the proceeds allocated to repurchasing shares and addressing existing debt, the company is likely aiming to bolster investor confidence and support its stock price. By setting the capped call transactions at a strike price of $20.42, investors are given a clear signal of the company's optimistic outlook on its future stock performance.

In the current financial market, convertible notes are often utilized by companies to take advantage of lower interest rates while providing potential equity upside to investors. However, the success of such offerings heavily relies on the company's ability to grow its earnings and maintain healthy cash flow to meet the debt obligations and conversion incentives. REPAY's move to repurchase approximately $40 million worth of shares concurrently indicates a commitment to share value, which can be reassuring to shareholders concerned about dilution.

For retail investors, understanding the implications of these financial maneuvers is key. The dual focus on debt management and share repurchase can be interpreted as a sign of financial robustness and strategic foresight in navigating future market conditions.

ATLANTA--(BUSINESS WIRE)-- Repay Holdings Corporation (NASDAQ: RPAY) (“REPAY” or the “Company”), a leading provider of integrated payment processing solutions, today announced the successful closing of its offering of $287.5 million aggregate principal amount of its 2.875% convertible senior notes due 2029 (the “Convertible Notes”), which includes the exercise in full of the $27.5 million principal amount option granted to the initial purchasers of the Convertible Notes.

John Morris, Co-founder and CEO of REPAY, said, “We are pleased to successfully close this important financing for the Company, and we greatly appreciate the tremendous support from both existing and new investors. The transaction fortifies our balance sheet by addressing $220.0 million principal amount of our 2026 maturities, while providing us with financial flexibility to continue focusing on profitable growth and cash generation.”

“We designed this transaction to minimize the future dilution for our shareholders," said Tim Murphy, CFO of REPAY. "Our repurchase of approximately 3.9 million shares concurrently with the offering and our commitment to repay the principal amount of the new Convertible Notes in cash are expected to further reduce potential share dilution even beyond the $20.42 capped call strike price."

Overview of the Transaction:

• Offering Size: $287.5 million aggregate principal amount, including the full exercise of the initial purchasers' $27.5 million principal amount option
• Interest Rate: 2.875% per annum, payable semiannually, beginning on January 15, 2025
• Initial Conversion Rate: 76.8182 shares of the Company’s Class A common stock (the “common stock”) per $1,000 principal amount of Convertible Notes
• Initial Conversion Price: Approximately $13.02 per share, representing a premium of approximately 27.5% over the closing price of the common stock on July 2, 2024
• Capped Call Cap Price: Initially set at $20.42 which represents a 100% premium over the closing price of the common stock on July 2, 2024

Uses of Net Proceeds:

• Repurchase of 2026 Convertible Senior Notes: Approximately $200.0 million of the net proceeds, combined with approximately $5.1 million of cash on hand, were used to repurchase $220.0 million in aggregate principal amount of the Company’s outstanding convertible senior notes due 2026
• Capped Call Transactions: Approximately $39.2 million of the net proceeds were used to fund the cost of the capped call transactions
• Share Repurchase: Approximately $40.0 million of the net proceeds were used to repurchase approximately 3.9 million shares of the common stock

The Convertible Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The offer and sale of the Convertible Notes and any shares of common stock issuable upon conversion of the Convertible 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 absent registration or except pursuant to an applicable 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 Convertible Notes, nor will there be any sale of the Convertible Notes or any such shares, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.

About Repay

REPAY provides integrated payment processing solutions to verticals that have specific transaction processing needs. REPAY’s proprietary, integrated payment technology platform reduces the complexity of electronic payments for clients, while enhancing the overall experience for consumers and businesses.

Forward-Looking Statements

This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about potential share dilution and other effects of the offering and the use of proceeds and other statements identified by words such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “believe,” “intend,” “plan,” “projection,” “outlook” or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of REPAY’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond REPAY’s control, including, without limitation, the factors described in REPAY’s reports filed with the SEC. Actual results and the timing of events may differ materially from the results anticipated in these forward-looking statements.

All information set forth herein speaks only as of the date hereof in the case of information about REPAY or the date of such information in the case of information from persons other than REPAY, and we disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240708068863/en/

Investor Relations Contact for REPAY:

ir@repay.com



Media Relations Contact for REPAY:

Kristen Hoyman

khoyman@repay.com

Source: Repay Holdings Corporation

FAQ

What did REPAY announce on the closing of the convertible notes?

Repay Holdings announced the closing of its $287.5 million offering of 2.875% convertible senior notes due 2029.

What will REPAY use the proceeds from the convertible notes offering for?

The proceeds will be used to address $220 million of 2026 maturities, fund capped call transactions, and repurchase 3.9 million shares.

What is the interest rate on REPAY's new convertible senior notes?

The interest rate on REPAY's new convertible senior notes is 2.875%, payable semiannually.

What is the initial conversion price for REPAY's convertible notes?

The initial conversion price for REPAY's convertible notes is approximately $13.02 per share.

When will the interest on REPAY's convertible notes be payable?

The interest on REPAY's convertible notes will be payable semiannually, starting January 15, 2025.

How does REPAY plan to minimize future share dilution?

REPAY plans to minimize future share dilution by repurchasing approximately 3.9 million shares and committing to repay the principal amount of the new convertible notes in cash.