JWCA advises American Eagle Outfitters on the equitization of an additional $60.8mm of its convertible notes

December 2022 | read press release

Transaction Background

In June 2022, JWCA advised American Eagle Outfitters (“AEO” or “the Company”) on an overnight convertible exchange of $342.4mm (~83%) of its 2025 convertible paired with an accelerated share repurchase. The Company’s recent high stock price presented an opportunity to retire an additional portion of the 2025 convertible, which allowed American Eagle to continue its plan to further de-lever the balance sheet

American Eagle’s objectives included:

  • De-lever: retire the convertible to lower debt balance and interest expense

  • Use stock as the consideration to preserve cash

  • Minimize transaction and friction costs; execute as efficiently as possible

  • Minimize market and stock price risk

JWCA acted as Exchange Agent for the transaction and provided analysis and advice around:

  • Evaluate tactics around investor targeting and execution method

  • Balancing exchange considerations to minimize exchange price and friction costs

  • Investor outreach, negotiation, and execution of exchanges

Results

The Company further de-levered by delivering shares of its stock to retire the convertible:

  • Exchanged $60.8mm of their convertible notes for stock (87% of outstanding). In combination with the June 2022 exchange, AEO has now retired 97% of the original $415mm capital raise

  • Minimal transaction cost: the value delivered to investors was only marginally more than what the company already owed (underlying shares + remaining coupons)

  • Minimal stock selling: the majority of the shares delivered to investors are returned to the share lenders