HCI Group’s 4.75% Convertible Senior Notes Due 2042 Became Convertible on January 1, 2025
Rhea-AI Summary
HCI Group announced that its 4.75% Convertible Senior Notes Due 2042 became convertible by all Holders starting January 1, 2025, through March 31, 2025. This conversion opportunity was triggered because HCI's share price exceeded 130% of the Conversion Price of $80.54 during the final trading days of Q4 2024.
Holders can convert their Notes into HCI common stock at a ratio of approximately 12.4166 shares per $1,000 principal amount. For conversions before March 31, 2025, HCI plans to implement Physical Settlement, delivering only common stock. The company is also considering a full redemption of the Notes on June 5, 2025, if conditions are met, which require the stock price to maintain at least 130% above the Conversion Price for 20 trading days within any 30-day trading period.
Positive
- Strong stock performance evidenced by share price maintaining over 130% above conversion price
- Company's ability to settle conversions with common stock indicates strong liquidity position
- Potential early redemption option shows financial flexibility
Negative
- Potential dilution of existing shareholders if significant note conversion occurs
- Increased shares outstanding could pressure stock price
Insights
This convertible note development marks a pivotal financial event for HCI Group. With the stock price consistently trading above <money>$104.70</money> (130% of the <money>$80.54</money> conversion price), noteholders now have the opportunity to convert their 4.75% notes into equity at an advantageous ratio of 12.4166 shares per <money>$1,000</money> principal.
HCI's decision to opt for Physical Settlement through March 31 signals strong confidence in their equity value and balance sheet position. The potential full redemption after June 5, 2025, if conditions persist, suggests a strategic move to optimize their capital structure. This could result in significant deleveraging while providing an attractive exit for noteholders.
For investors, this represents a material change in HCI's capital structure, with potential dilution if significant conversion occurs. However, the company's proactive approach to managing its debt obligations demonstrates sound financial stewardship.
The timing of this conversion window is strategically significant. By allowing Physical Settlement, HCI is effectively managing its debt-to-equity transformation while the stock trades at strong levels. The conversion ratio implies a conversion price equivalent to approximately <money>$80.54</money> per share, representing substantial embedded value for noteholders given current market prices.
The potential redemption consideration for June 2025 suggests management's forward-looking approach to capital structure optimization. This could lead to reduced interest expenses and improved financial flexibility, though it may cause near-term dilution. The strong stock performance enabling this conversion reflects market confidence in HCI's business model across insurance, IT services, real estate and reinsurance segments.
TAMPA, Fla., Jan. 02, 2025 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE: HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, has announced that its
The terms of the Notes provide that the Notes will become convertible during a quarter, when the HCI closing share price for 20 trading days during the final 30 trading days of the immediately preceding quarter was greater than
All Holders who wish to convert their Notes into shares of HCI common stock must provide a Notice of Conversion to HCI. The requirements for such notice can be found in Section 13.02(b) of the Indenture by and between HCI and the Bank of New York Mellon, attached as Exhibit 4.1 to HCI’s Form 8-K filed with the Securities and Exchange Commission on May 23, 2022. Upon a Holder’s election to convert Notes, HCI will have the option to elect a Settlement Method – Physical Settlement, Cash Settlement or Combination Settlement. HCI states that for all Notices of Conversion received on or before the close of business on March 31, 2025, HCI plans to select Physical Settlement and settle such conversions fully in HCI common stock, at the current conversion ratio of approximately 12.4166 shares of HCI common stock per
HCI states further it is considering a full redemption of the Notes on June 5, 2025, if the conditions for redemption are met. The Company has the right to redeem the existing
About HCI Group, Inc.
HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities, including homeowners insurance, information technology services, insurance management, real estate, and reinsurance. HCI’s leading insurance operation, TypTap Insurance Company, is a technology-driven homeowners insurance company. TypTap’s operations are powered in large part by insurance-related information technology developed by HCI’s software subsidiary, Exzeo USA, Inc. HCI’s largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., provides homeowners insurance primarily in Florida. HCI’s real estate subsidiary, Greenleaf Capital, LLC, owns and operates multiple properties in Florida, including office buildings, retail centers and marinas.
The company's common shares trade on the New York Stock Exchange under the ticker symbol "HCI" and are included in the Russell 2000 and S&P SmallCap 600 Index. HCI Group, Inc. regularly publishes financial and other information in the Investor Information section of the company’s website. For more information about HCI Group and its subsidiaries, visit www.hcigroup.com.
Forward-Looking Statements
This news release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “confident,” “prospects,” and “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. There can be no assurance, for example, that changes in the company’s balance sheet and cash flow will not impact the ability or willingness of HCI Group to elect physical delivery or to redeem the Notes. Some of these risks and uncertainties are identified in the company’s filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company’s business, financial condition and results of operations. HCI Group, Inc. disclaims all obligations to update any forward-looking statements.
Company Contact:
Bill Broomall, CFA
Investor Relations
HCI Group, Inc.
Tel (813) 776-1012
wbroomall@typtap.com
Investor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel 949-574-3860
HCI@gatewayir.com
FAQ
What is the conversion ratio for HCI Group's 4.75% Convertible Notes due 2042?
When did HCI Group's convertible notes become eligible for conversion?
What is the conversion price for HCI Group's 2042 convertible notes?
When might HCI Group redeem its 4.75% Convertible Notes?
What settlement method will HCI use for note conversions through March 31, 2025?
