JWCA advises molina healthcare on An exchange of $176.6 Million of their 3.75% convertible notes due 2014 into 1.625% convertible notes due 2044

September 2014 | READ COMPANY ANNOUNCEMENT

Transaction Background

JWCA was hired by Molina Healthcare to evaluate its capital structure.  The recommendation was to push out the maturity of its existing debt by exchanging a portion of the 3.75% Convertible Notes due 2014 into 1.625% Convertible Senior Notes due 2044.  In the exchange, JWCA:

• Assisted the Molina team with comparative analytics around exchange consideration strategies:  (1) all convertible, or (2) mix of cash + convertible + shares

• Specifically designed the strategy, investor outreach and execution process to meet the company’s objectives:

  • -  Designed the exchange strategy in order to mitigate impact on the company’s stock price

  • -  Focused on preserving cash

  • -  Minimized cost of execution

• Assisted the team with documentation, accounting, and tax review

• Led the negotiation with investors

Results

• Exchanged ~95% of their 3.75% Convertible Senior Notes due 2014, thereby pushing out the refinancing at least 4 years

• Achieved a 1.625% coupon, 0.375% lower than expected, saving the company ~$2.6mm in total savings (for 4 year expected life)

• Obtained a tax deduction rate of 7.50% through the Contingent Pay Debt Instrument design

• Delivered a smarter, more efficient execution:

  • -  Positive stock price performance:  MOH share price rose +13.6% during the execution period vs. an average decline of -8.0% for similar size convertibles

  • -  Lower execution costs:  fees were nearly 50% lower than average fees for similarly sized convertibles, saving the company ~$2.8 million

  • -  No company marketing, so management could focus on running the business