JWCA advises hubspot on its $460 million convertible bond and capped call offering, simultaneous repurchase, and call spread unwind

June 2020 | read press release

Transaction Background

HubSpot successfully raised $460mm in the convertible market at attractive terms (0.375% coupon and 32.5% conversion premium), while refinancing $272mm (68%) of its convertible due 2022

Notwithstanding elevated market volatility, HubSpot took advantage of its strong stock price performance to successfully execute the issuance of its convertible and capped call execution along with the refinancing of its outstanding convertible

HubSpot engaged J. Wood Capital Advisors to assist in the structuring, negotiation, documentation and execution of its transaction, including:

• Convertible structuring: redemption options and implications on overall economics

• Repurchase considerations: all cash vs cash and stock repurchase

• Derivative overlay: call spread vs capped call

• Accounting and tax analysis/implications

• Convertible and capped call documentation to ensure maximum value and future efficiency/flexibility for the company

• Call spread unwind analysis and negotiation

• Syndicate structure and precedent data

JWCA designed and ran a capped call auction process to achieve competitive terms

JWCA provided advice, support and analysis throughout the negotiation and execution process

Results

HubSpot’s convertible issuance was very well-received by investors   

• The 0.375% coupon and 32.5% conversion premium represented the midpoint of the marketed coupon and conversion premium ranges

• Repurchased $272mm of existing bonds (68%)

HubSpot’s stock price increased +6.6% on pricing day (compared to an average stock price decline of –3.7%  for U.S. technology convertibles 2019-2020ytd)

Unwind negotiation ensured HubSpot received maximum value on the unwind of its existing call spread

Capped call documentation and auction process produced meaningful savings for HubSpot, while maximizing flexibility for the Company