Upstart Announces Proposed Private Offering of $425,000,000 of Convertible Senior Notes Due 2030

Rhea-AI Summary

Upstart Holdings (NASDAQ: UPST) has announced plans to offer $425 million in Convertible Senior Notes due 2030 through a private offering to qualified institutional buyers. The company may grant initial purchasers an option to buy an additional $75 million in notes. The notes will be senior, unsecured obligations with semi-annual interest payments, convertible into cash, Upstart common stock, or a combination at the company's discretion. The proceeds will be used for general corporate purposes, including potential debt repayment. Specific terms, including interest rate and conversion rate, will be determined during pricing.

Positive

• Potential strengthening of balance sheet through $425 million capital raise
• Option for additional $75 million in funding
• Flexibility in conversion terms (cash, stock, or combination)
• Opportunity to refinance existing debt

Negative

• Potential future shareholder dilution if notes are converted to stock
• Additional long-term debt obligation until 2030
• Increased interest expense burden on the company

Insights

Financial Analyst

This convertible note offering represents a significant financial move for Upstart, potentially raising up to $500M if the additional option is exercised. The 2030 maturity provides long-term flexibility, but the convertible nature could lead to future dilution for existing shareholders. The company's intention to use proceeds for general corporate purposes and debt management suggests a strategic refinancing effort, possibly to address their existing debt obligations in a rising rate environment.

The convertible feature, allowing conversion into cash or stock at Upstart's discretion, provides flexibility in managing future obligations. However, the absence of defined conversion rates and interest terms at this stage creates uncertainty around the true cost of this capital raise. This debt issuance to qualified institutional buyers indicates strong institutional interest, though it may impact the company's debt-to-equity ratios and future financial flexibility.

SAN MATEO, Calif.--(BUSINESS WIRE)-- Upstart Holdings, Inc. (NASDAQ: UPST) today announced its intention to offer, subject to market conditions and other factors, $425,000,000 aggregate principal amount of Convertible Senior Notes due 2030 (the “notes”) in a private offering (the “offering”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Upstart also expects to grant the initial purchasers of the notes an option to purchase, within a 13-day period beginning on, and including, the date the notes are first issued, up to an additional $75,000,000 aggregate principal amount of the notes.

The notes will be senior, unsecured obligations of Upstart, and will bear interest payable semi-annually in arrears. The notes will mature on November 15, 2030, unless earlier converted, repurchased or redeemed. The notes will be convertible into cash, shares of Upstart’s common stock, or a combination thereof, at Upstart’s election. The interest rate, initial conversion rate, and other terms of the notes will be determined at the time of pricing of the offering.

Upstart intends to use the net proceeds from the offering for general corporate purposes, which may include the repayment or the retirement of existing debt.

The notes will only be offered to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act by means of a private offering memorandum. Neither the notes nor the shares of Upstart’s common stock potentially issuable upon conversion of the notes, if any, have been, or will be, registered under the Securities Act or the securities laws of any other jurisdiction, and unless so registered, may not be offered or sold in the United States, except pursuant to an applicable exemption from such registration requirements.

This announcement is neither an offer to sell nor a solicitation of an offer to buy any of these securities and shall not constitute an offer, solicitation, or sale in any jurisdiction in which such offer, solicitation, or sale is unlawful.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241111643622/en/

Investors

ir@upstart.com

Press

press@upstart.com

Source: Upstart Holdings, Inc.

FAQ

What is the size of Upstart's (UPST) 2024 convertible notes offering?

Upstart is offering $425 million in Convertible Senior Notes, with an option for an additional $75 million, totaling a potential of $500 million.

When do Upstart's (UPST) new convertible notes mature?

The convertible notes will mature on November 15, 2030, unless converted, repurchased, or redeemed earlier.

How can Upstart's (UPST) 2030 convertible notes be settled?

The notes can be converted into cash, shares of Upstart's common stock, or a combination of both, at Upstart's election.

What is the purpose of Upstart's (UPST) 2024 convertible notes offering?

The proceeds will be used for general corporate purposes, which may include repayment or retirement of existing debt.