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JWCA advises INphi on its upsized $506 million convertible BOND and capped call issuance

April 2020 | read press release

Transaction Background

Inphi Corp successfully raised $440mm in the convertible market (upsized by 33% from $330mm launch size) at very attractive terms (0.75% coupon and 32.5% conversion premium)

Notwithstanding the continued elevated market volatility amidst an ongoing global health crisis, Inphi took advantage of recent strong momentum in its stock price to successfully execute its convertible and capped call execution

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

JWCA provided extensive analysis for Inphi on deal structuring and related items, including:

  • Convertible structuring

  • Derivative overlay: call spread vs capped call

  • Accounting and tax analysis/implications

  • Repurchase of existing convertible implications

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

  • 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

Inphi’s convertible issuance was very well-received by investors, despite a challenging macro and equity market environment:

  • The deal was upsized 33% to $440mm base size from original $330mm base deal size

  • The coupon priced at the low end and the conversion premium priced at the high end of the marketed coupon and conversion premium ranges 

The capped call auction process resulted in an 11.0% upfront cost to raise the effective conversion price to 100% above the stock price at issue, resulting in a 3.14% pre-tax IRR

Inphi also repurchased $100mm of its Convertible Notes due 2020 for a premium of less than 0.5%

Inphi raised ~10% of its market cap in a single day with the stock down only 2.7% against the S&P down 3.1%, and despite technical selling pressure associated with the convertible offering

Capped call documentation and auction process produced meaningful savings for Inphi, while mitigating future downside scenarios