JWCA advises zENDESK on its $1.15 billion convertible bond AND CAPPED CALL offering, simultaneous repurchase, and capped call unwind

june 2020 | read press release

Transaction Background

Zendesk successfully raised $1bn in the convertible market at attractive terms (0.625% coupon and 32.5% conversion premium), while simultaneously retiring $426mm (74%) of its convertible due 2023

Notwithstanding elevated market volatility, Zendesk took advantage of its strong post-COVID stock price performance to successfully execute the issuance of its convertible and capped call along with the refinancing of its outstanding convertible

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

• Convertible structuring: redemption options and implications on overall economics

• Repurchase considerations: all stock vs cash and stock repurchase

• Repurchase premium

• Accounting and tax analysis/implications

• Convertible and capped call documentation to ensure maximum value and future efficiency/flexibility for the company

• Call spread unwind analysis and negotiation

• Syndicate structure and precedent data

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

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

Results

Zendesk’s convertible issuance was very well-received by investors

•  Successfully raised $1bn financing, in spite of executing on the fourth-worst day for equities post-COVID, as measured by daily S&P performance

• Repurchased $426mm of existing bonds (74%) with minimum friction cost

Unwind negotiation ensured Zendesk received maximum value on the unwind of its existing capped call

Capped call documentation and auction process produced meaningful savings for Zendesk, while maximizing flexibility for the Company