JWCA advises Xero on its $925 million convertible bond and call spread offering, simultaneous repurchase, and call spread unwind

June 2024 | read press release

Transaction Background

Xero successfully raised $925mm in the convertible market at attractive terms (1.625% coupon and 30% conversion premium), while simultaneously retiring $646mm (92%) of its convertible due 2025

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

• Convertible and derivative overlay structuring

• Cost of capital analysis

• Syndicate structure and precedent data

• Convertible and call spread structuring to align with Company’s objectives

• Call spread unwind analysis and negotiation

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

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

Results

Xero executed a successful capital raise and re-financing:

• Raised US$925mm of capital in a wall-cross and overnight execution, upsized from an initial offering size of US$850mm

• Repurchased 92% of existing bonds at discount to par with minimum friction cost

• Priced at the mid end of both the initial coupon range of 1.375 – 1.875% and conversion premium range of 27.5 – 32.5%

• Priced overnight with no market risk

The Company added a single, discrete put which helped save the Company ~$4.6mm a year in interest expense

Unwind negotiation ensured Xero received maximum value from its existing call spread

Auction process for new call spread produced meaningful savings for Xero, while still allowing key partnership banks to participate

This is JWCA’s third advisory assignment for the company since 2018