JWCA advises OKTA ON ITS $1.06 Billion convertible bond and CAPPED CALL OFFERING, SIMULTANEOUS REPURCHASE, AND CALL SPREAD UNWIND

SEPTEMBER 2019 | read press release

Transaction Background

After experiencing strong stock performance since its 2018 convertible offering, Okta was interested in taking advantage of its momentum to raise equity-linked capital while also retiring a portion of its existing convertible to mitigate its dilutive impact

• JWCA guided Okta through various structuring and execution considerations:

  • Call spread vs capped call decision

  • Mix of consideration delivered in the repurchase (new convertible vs stock vs cash), and its impact on the Company’s pro-forma balance sheet

  • Accounting for convertible issuance, convertible extinguishment, capped call purchase, and call spread unwind

  • Syndicate negotiation, selection and fees

  • Documentation, in light of long term capital structure optimization

• JWCA designed and ran a capped call auction process to achieve competitive terms for the new capped call purchase, while also designing a call spread unwind process to maximize proceeds for the Company

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

Results

• Okta’s convertible issuance was very well-received by investors:

  • Convert priced near the company-friendly end of the marketed coupon range (0.125% vs 0.00 – 0.50%)

  • Priced at the company-friendly end of the marketed premium range (47.5% vs 42.5 – 47.5%)

  • Repurchased $224mm (65.0%) of outstanding 2023 convertibles at Company- friendly terms

• Call spread negotiation and documentation produced meaningful savings for Okta, while mitigating future downside scenarios