JWCA advises KBR on the repurchase of $100mm convertible notes for cash and concurrent unwind of call spread 

June 2023 | read press release

Transaction Background

In June 2023, JWCA advised KBR (the “Company”) on the repurchase of $100mm of its 2023 convertible. KBR had a deep in-the-money convertible that was trading below it's underlying conversion value + remaining coupons. 

KBR’s objectives included:

  • Extinguish a portion of the convertible prior to the upcoming maturity using all cash, with no premium paid to the underlying share value

  • Avoid a longer observation period at maturity

  • Unwind the call spread for fair value simultaneously as opposed to a mismatched call spread maturity (the warrant matures 3 months after the bond hedge)

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

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

  • Investor outreach, negotiation, and observation period structure of full transaction 

  • Assisted the Company with the analysis of convertible economics, pricing dynamics, and accounting

  • Managed call spread unwind negotiation 

Results

The Company executed a successful liability management transaction for its 2.50% convertible notes due 2023:

  • Repurchased $100mm of their convertible notes (~29% of outstanding) for cash

  • Saved the Company over $1mm by repurchasing the convertible for the value of the underlying shares, with no friction cost from the conversion option or additional interest required

  • Avoided a long observation period at maturity and made for efficient execution and market risk

  • Call spread unwind negotiations produced meaningful savings for the Company 

  • Successfully amended the remaining warrants to add feature to cash settle at Company’s election