UGI Corporation Announces Proposed Convertible Senior Notes Offering
UGI (NYSE: UGI) has announced a proposed offering of $600 million in convertible senior notes due in 2028. These notes will be offered privately to qualified institutional buyers. UGI has also granted an option for the initial purchasers to buy an additional $90 million of notes. The notes are senior, unsecured, and will accrue interest semi-annually, maturing on June 1, 2028. They can be converted into cash and, if applicable, shares of UGI common stock under specific conditions. Noteholders can require UGI to repurchase the notes if a 'fundamental change' occurs. The proceeds will be used to refinance existing debt and for general corporate purposes.
- UGI is raising $600 million through convertible senior notes, potentially increasing to $690 million.
- The notes will accrue interest semi-annually and have a maturity date of June 1, 2028.
- Proceeds from the offering will be used to refinance existing debt and for general corporate purposes, which can improve financial stability.
- The notes offering is subject to market and other conditions, introducing uncertainty.
- These notes are senior, unsecured obligations, which may imply higher risk for investors compared to secured debt.
- The notes are not redeemable before maturity, limiting flexibility for the company.
- Convertible notes can dilute existing shareholders' equity if converted into shares.
- The offering and any resulting shares are not registered under the Securities Act, limiting liquidity and marketability.
Insights
UGI Corporation's proposed offering of $600,000,000 in convertible senior notes, with an option to boost it by $90,000,000, marks a noteworthy step towards refinancing its existing indebtedness and bolstering its corporate financial position. Convertible senior notes are debt instruments that can be converted into equity, meaning these notes are senior in claim over other debts but offer potential equity upside for investors if the conversion option becomes favorable.
Two key points to consider here are:
1. **Interest Rate and Conversion Rate**: The interest rate and initial conversion rate will not be detailed until the notes are priced, which introduces uncertainty for investors. Higher-than-expected interest rates could increase UGI's debt servicing costs, while the conversion rate will determine the attractiveness of the equity upside.
2. **Use of Proceeds**: UGI plans to use the proceeds for refinancing existing debt and for general corporate purposes. This can be beneficial in lowering overall interest costs if the new debt terms are more favorable than the existing ones. However, the lack of specific details on the existing indebtedness and the refinancing terms makes it harder to fully gauge the financial impact.
Convertible notes are complex financial instruments that balance debt and equity features. Their success often hinges on company performance and market conditions, which investors should monitor closely in the coming months.
The issuance of convertible senior notes signals UGI's initiative to strengthen its financial flexibility and manage its debt structure more efficiently. Convertible notes appeal to a diverse investor base because they offer both fixed income from interest payments and potential equity growth. For UGI, this move could attract institutional investors who are optimistic about the company's long-term prospects.
Market perception will play a important role here. The demand for these notes will reflect investor confidence in UGI's ability to leverage the raised capital to enhance its operations and financial health. If well-received, this could positively impact UGI's share price by signaling strong market confidence. Conversely, if poorly received or priced unfavorably, it might suggest hesitancy about the company's future performance.
Investors should also consider the macroeconomic climate. Interest rates, inflation and the broader economic outlook will influence the attractiveness of these notes. In a rising interest rate environment, fixed-income securities like these may become less attractive compared to other investment opportunities.
Understanding the broader financial strategy behind such moves can provide deeper insights into UGI's market positioning and future prospects.
The notes will be senior, unsecured obligations of UGI, will accrue interest payable semi-annually in arrears and will mature on June 1, 2028, unless earlier repurchased or converted. Noteholders will have the right to convert their notes in certain circumstances and during specified periods. UGI will settle conversions in cash and, if applicable, shares of its common stock.
The notes will not be redeemable at UGI’s election before maturity.
If certain corporate events that constitute a “fundamental change” occur, then, subject to a limited exception, noteholders may require UGI to repurchase their notes for cash. The repurchase price will be 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 interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering.
UGI intends to use the net proceeds from the offering to refinance existing indebtedness of UGI, including under UGI’s senior credit facility, and its subsidiaries and, for general corporate purposes.
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 UGI Corporation
UGI Corporation (NYSE: UGI) is a distributor and marketer of energy products and services in the US and
Forward-Looking Statements
This press release includes forward-looking statements, including statements regarding the anticipated terms of the notes being offered, the completion, timing and size of the proposed offering and the intended use of the proceeds. Forward-looking statements represent UGI’s current expectations regarding future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Among those risks and uncertainties are market conditions, including market interest rates, the trading price and volatility of UGI’s common stock and risks relating to UGI’s business, including those described in periodic reports that UGI files from time to time with the SEC. UGI 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 offering or the notes or its ability to effectively apply the net proceeds as described above. The forward-looking statements included in this press release speak only as of the date of this press release, and UGI does not undertake to update the statements included in this press release for subsequent developments, except as may be required by law.
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Investor Relations
610-337-1000
Tameka Morris, ext. 6297
Arnab Mukherjee, ext. 7498
Source: UGI Corporation
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