Granite Construction Incorporated Successfully Completes Offering of $373.75 Million Convertible Senior Notes

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Granite Construction Incorporated (NYSE: GVA) announced the successful completion of its recent offering of $373.75 million aggregate principal amount of Convertible Senior Notes due 2030. The offering, which included the full exercise of the initial purchasers’ option to purchase an additional $48.75 million aggregate principal amount of the Convertible Notes, resulted in gross proceeds of $373.75 million. The Convertible Notes were sold in a private offering to qualified institutional buyers.

After deducting the initial purchasers’ discount and estimated offering expenses, Granite estimates that the net proceeds from the offering were approximately $364.2 million. A portion of these net proceeds was used to cover the costs of entering into capped call transactions related to the Convertible Notes. Additionally, Granite utilized a portion of the net proceeds to repurchase $30.2 million in aggregate principal amount of its existing Convertible Senior Notes due 2024.

The remaining net proceeds from the offering will be allocated towards repaying outstanding amounts under Granite’s term loan and for general corporate purposes, including potential acquisitions or share repurchases.

The Convertible Notes, which are unsecured senior obligations of Granite, will bear interest at a rate of 3.25% per annum and are payable semi-annually. They will mature on June 15, 2030, unless earlier converted, redeemed, or repurchased. The initial conversion rate of the Convertible Notes is set at 12.8398 shares of Granite’s common stock per $1,000 principal amount of Convertible Notes, representing a conversion price of approximately $77.88 per share.

Granite will have certain restrictions on redeeming the Convertible Notes until June 21, 2027. After that date, the company may redeem all or a portion of the Convertible Notes at its option, subject to specific conditions. Holders of the Convertible Notes also have the right to require Granite to repurchase their notes under certain circumstances.

To offset potential dilution and cash payments upon conversion of the Convertible Notes, Granite entered into privately negotiated capped call transactions with the initial purchasers and other financial institutions. These capped call transactions will cover the number of shares of Granite’s common stock initially underlying the Convertible Notes.

Overall, Granite Construction Incorporated’s successful offering of Convertible Senior Notes demonstrates the company’s strategic approach to capital management and future growth opportunities.

Granite Construction Incorporated’s successful completion of its offering of $373.75 million Convertible Senior Notes is indicative of the company’s focus on capital management and pursuit of future growth opportunities. The offering resulted in gross proceeds of $373.75 million, with net proceeds estimated to be around $364.2 million after deducting expenses.

The Convertible Notes, which are unsecured senior obligations of Granite, will bear interest at a rate of 3.25% per annum and mature on June 15, 2030, unless earlier converted, redeemed, or repurchased. The initial conversion rate is set at 12.8398 shares of Granite’s common stock per $1,000 principal amount of Convertible Notes, representing a conversion price of approximately $77.88 per share.

One advantage of the offering and issuance of Convertible Senior Notes is that it provides Granite with additional capital for various purposes, such as repaying outstanding amounts under the company’s term loan and general corporate purposes, including potential acquisitions or share repurchases. This injection of capital can support the company’s growth strategy and enhance its financial flexibility.

However, it is worth noting that the Convertible Notes come with certain restrictions and conditions. Granite will have limitations on redeeming the Convertible Notes until June 21, 2027. After that date, the company may redeem all or a portion of the Convertible Notes at its discretion, subject to specific conditions. Holders of the Convertible Notes also have the right to require Granite to repurchase their notes under certain circumstances.

To mitigate potential dilution and cash payments upon conversion of the Convertible Notes, Granite entered into privately negotiated capped call transactions with the initial purchasers and other financial institutions. These capped call transactions serve as a hedge and will cover the number of shares initially underlying the Convertible Notes. This provides Granite with some protection against potential stock price volatility.

In terms of current market trends, convertible debt offerings have been popular among companies seeking to raise capital while taking advantage of low interest rates. These offerings allow companies to access funds at a lower borrowing cost compared to traditional debt instruments. Additionally, convertible notes offer the potential for equity participation, providing investors with the option to convert their notes into company shares at a predetermined price, which can be attractive in a rising stock market.

Moving forward, Granite Construction Incorporated will likely utilize the net proceeds from the offering to support its growth objectives, including potential acquisitions or share repurchases. The company will also need to strategically manage its capital and leverage the added financial flexibility provided by the convertible notes. It will be essential for Granite to assess potential risks and challenges associated with the Convertible Senior Notes, such as the potential impact on stock dilution and the need for future cash payments upon conversion.

For further information, please visit Granite Construction Incorporated’s official website: link.