Global Payments Announces Proposed Offering of $1.75 Billion of Convertible Senior Notes due 2031
Global Payments Inc. (GPN) plans to offer $1.75 billion in convertible senior notes due 2031. The company may grant an option for an additional $250 million. The notes will mature on March 1, 2031, and may be convertible at certain conditions. The offering aims to fund capped call transactions and share repurchases.
The announcement by Global Payments Inc. regarding its intention to offer $1.75 billion in convertible senior notes due in 2031, with an option for purchasers to acquire an additional $250 million, signifies a strategic financial maneuver to strengthen the company's balance sheet. Convertible notes are a form of debt that can be converted into equity, typically shares of the issuing company, under specific conditions. This dual nature of the instrument appeals to investors seeking both the security of fixed income and the potential upside of equity participation.
The decision to use proceeds to repurchase shares and repay existing debt could be seen as a positive move towards capital restructuring, potentially signaling confidence in the company's future performance. Repurchasing shares may also be a strategy to bolster the stock price by reducing the number of shares outstanding, which can result in higher earnings per share (EPS). However, the effectiveness of this strategy depends on the market's perception of the company's value and growth prospects.
Investors should also consider the potential for dilution of existing shares upon conversion of the notes, although the capped call transactions intended by Global Payments aim to minimize this effect. The capped calls are essentially financial instruments that can hedge the company against the dilution risk posed by the conversion feature of the notes. The cap in these transactions limits the number of shares the company would have to issue upon conversion, thereby potentially protecting existing shareholders from significant dilution.
Global Payments Inc.'s move to issue convertible notes can be interpreted within the broader context of the payment processing industry, where companies often require substantial capital for technological investments and strategic acquisitions to stay competitive. The use of convertible notes provides flexibility in financing such initiatives without immediately diluting shareholder equity. Market conditions, including interest rates and investor appetite for corporate debt, will influence the pricing and attractiveness of the notes to potential investors.
The repurchase of common stock concurrent with the issuance of the notes is a noteworthy aspect of the company's strategy. This action could be perceived as a commitment to shareholder value, but it also raises questions about the timing and pricing of the repurchases. These transactions can affect the market price of the stock, which is relevant to both current shareholders and potential investors in the convertible notes.
Lastly, the impact of the hedging activities by the option counterparties on the market price of the company's common stock and the convertible notes is a complex aspect that requires careful consideration. These activities can lead to significant trading volume and volatility in the short term, which may not necessarily reflect the company's fundamental value but rather the mechanics of the financial instruments involved.
The legal framework surrounding the issuance of convertible notes is intricate, involving compliance with the Securities Act of 1933. Global Payments has opted to offer these securities under Rule 144A, targeting qualified institutional buyers, which allows for a more expedited process than a public offering. The exemption from registration under the Securities Act indicates that the offering will be limited to a specific investor class and will not be as widely accessible as a public issuance would be.
Furthermore, the company's redemption rights, set to activate in 2028, introduce a legal mechanism for Global Payments to potentially retire the debt early, provided certain market conditions are met. The legal stipulations around the redemption feature and the cap on the capped call transactions will be critical in determining the rights and potential returns for investors. These terms will be closely scrutinized by institutional investors, who will assess the legal risks alongside the financial benefits of the offering.
02/20/2024 - 07:00 AM
ATLANTA --(BUSINESS WIRE)--
Global Payments Inc. (NYSE: GPN) today announced that it intends to offer, subject to market conditions and other factors, $1.75 billion $250 million
The Convertible Notes will be senior unsecured obligations of the Company and will accrue interest payable semi-annually in arrears. The Convertible Notes will mature on March 1, 2031, unless earlier repurchased, redeemed or converted. Prior to December 1, 2030, the Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, the Convertible Notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The Convertible Notes will be convertible, on the terms set forth in the indenture, into cash up to the aggregate principal amount of the Convertible Notes to be converted and cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. The interest rate, initial conversion rate, initial conversion price and other terms of the Convertible Notes will be determined at the time of the pricing of the offering.
The Company may not redeem the Convertible Notes prior to March 6, 2028. The Company may redeem for cash all or part of the Convertible Notes, at its option, on or after March 6, 2028, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
In connection with the pricing of the Convertible Notes, the Company expects to enter into privately negotiated capped call transactions with one or more of the initial purchasers of the Convertible Notes or their respective affiliates and/or other financial institutions (the “option counterparties”). The Company intends to use a portion of the net proceeds from the offering to pay the cost of the capped call transactions. If the initial purchasers of the Convertible Notes exercise their option to purchase additional Convertible Notes, the Company expects to use a portion of the net proceeds from the sale of the additional Convertible Notes to enter into additional capped call transactions with the option counterparties.
The Company expects to use up to $300 million
The capped call transactions are expected generally to reduce potential dilution to the Company’s common stock upon conversion of any Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the capped call transactions, the Company expects the option counterparties or their respective affiliates to purchase shares of the Company’s common stock and/or enter into various derivative transactions with respect to the Company’s common stock concurrently with or shortly after the pricing of the Convertible Notes. This activity could increase (or reduce the size of any decrease in) the market price of the Company’s common stock or the Convertible Notes at that time. In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to the Company’s common stock and/or purchasing or selling shares of the Company’s common stock or other securities of the Company in secondary market transactions following the pricing of the Convertible Notes and prior to the maturity of the Convertible Notes (and are likely to do so on each exercise date for the capped call transactions or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the Convertible Notes). This activity could also cause or avoid an increase or decrease in the market price of the Company’s common stock or the Convertible Notes, which could affect holders’ ability to convert the Convertible Notes and, to the extent the activity occurs following any conversion of the Convertible Notes or during any observation period related to a conversion of the Convertible Notes, it could affect the amount and value of the consideration that holders of the Convertible Notes will receive upon conversion of such Convertible Notes.
The offer and sale of the Convertible Notes, and any shares of the Company’s common stock issuable upon conversion of the Convertible Notes, have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and neither the Convertible Notes nor any shares of the Company’s common stock issuable upon conversion of the Convertible Notes may be offered or sold in the United States absent registration or an applicable exemption from registration under the Securities Act and any applicable state securities laws. The Convertible Notes will be offered only to persons reasonably believed to be qualified institutional buyers under Rule 144A under the Securities Act.
This press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities, including the Convertible Notes or Global Payments’ common stock, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
About Global Payments
Global Payments Inc. (NYSE: GPN) is a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world.
Headquartered in Georgia with approximately 27,000 team members worldwide, Global Payments is a Fortune 500® company and a member of the S&P 500 with worldwide reach spanning North America , Europe , Asia Pacific and Latin America .
Forward-Looking Statements
Some of the statements we use in this press release are not statements of historical or current fact. As such, they are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, including statements concerning the timing and completion of the offering of the Convertible Notes, the capped call transactions and the anticipated use of proceeds from the offering. We have based these forward-looking statements on our current plans and expectations, and these statements are subject to known and unknown risks, uncertainties and assumptions. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Although it is not possible to create a comprehensive list of all factors and risks that may cause actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: the final terms of the proposed offering of the Convertible Notes and capped call transactions; the satisfaction of customary closing conditions related to the offering; uncertainties and other factors relating to the intended use of proceeds from the offering and sale of the Convertible Notes. Although we believe that the plans and expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our plans and expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those identified elsewhere in this communication and those included in the “Risk Factors” section in our most recent Annual Report on Form 10-K and in other documents that we file with the SEC, which are available at https://www.sec.gov .
These cautionary statements qualify all of our forward-looking statements, and you are cautioned not to place undue reliance on these forward-looking statements. Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. While we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to publicly release the results of any revisions to our forward-looking statements, except as required by law.
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Media Contact:
media.relations@globalpay.com
Investor Contact:
investor.relations@globalpay.com
Source: Global Payments Inc.
What is Global Payments Inc.'s ticker symbol?
The ticker symbol for Global Payments Inc. is GPN.
What is the total amount of convertible senior notes Global Payments Inc. plans to offer?
Global Payments Inc. intends to offer $1.75 billion in aggregate principal amount of its convertible senior notes due 2031.
When will the convertible notes mature?
The convertible notes will mature on March 1, 2031, unless earlier repurchased, redeemed, or converted.
What are the intended uses of the net proceeds from the offering?
The net proceeds from the offering will be used for capped call transactions, share repurchases, repayment of borrowings, and general corporate purposes.
Who can the convertible notes be offered to?
The convertible notes will be offered only to qualified institutional buyers under Rule 144A under the Securities Act.
Can the convertible notes be redeemed before March 6, 2028?
The convertible notes may not be redeemed prior to March 6, 2028.
What are the terms of conversion for the convertible notes?
The convertible notes will be convertible into cash, shares of the company's common stock, or a combination of both, based on the terms set forth in the indenture.
What is the purpose of the capped call transactions?
The capped call transactions aim to reduce potential dilution to the company's common stock upon conversion of the convertible notes and offset any excess cash payments.
Is the offer of convertible notes registered under the Securities Act?
The offer and sale of the convertible notes have not been and will not be registered under the Securities Act.
What is the maturity date of the convertible notes?
The convertible notes will mature on March 1, 2031, unless earlier repurchased, redeemed, or converted.
