JWCA advises XERO on itS $700 million convertible bond AND CALL SPREAD OFFERING, SIMULTANEOUS REPURCHASE, AND CALL SPREAD UNWIND

November 2020 | read press release

Transaction Background

Xero took advantage of its strong stock price performance to successfully execute a liability management exercise through the issuance of a new convertible and call spread, along with the repurchase of its outstanding convertible

Xero successfully raised $700mm in the convertible market at attractive terms (0.00% coupon and 35% conversion premium), while simultaneously retiring $294mm (98%) of its convertible due 2023 

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

• Convertible and call spread pricing considerations

• 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

• Raised US$700mm of capital in a wall-cross and overnight execution, upsized from an initial offering size of US$600mm

• Repurchased $294mm of existing bonds (98%) with minimum friction cost

• Priced at the low end of the initial coupon range of 0 – 0.5%, and 2.5% above the initial conversion premium range of 27.5 – 32.5%

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