Jazz Pharmaceuticals Announces Pricing of Private Offering of $850 Million of 3.125% Exchangeable Senior Notes due 2030 and Concurrent Ordinary Share Repurchases

Rhea-AI Summary

Jazz Pharmaceuticals announced the pricing of $850 million in 3.125% exchangeable senior notes due 2030, with an option for an additional $150 million. The notes, issued by Jazz Investments I , will mature on September 15, 2030, with a 3.125% annual interest rate. The initial exchange rate is 6.5339 ordinary shares per $1,000 principal amount, equivalent to $153.05 per share. Jazz expects $833.7 million in net proceeds, planning to use $350 million to prepay term loans. Concurrently, Jazz repurchased $150 million of its ordinary shares at $109.32 per share.

Positive

• Raised $850 million through exchangeable senior notes offering
• Option for additional $150 million in notes
• 3.125% annual interest rate on the notes
• Initial exchange price of $153.05 per share, a 40% premium over current price
• $833.7 million estimated net proceeds from the offering
• Plans to use $350 million to prepay term loans

Negative

• Increased debt burden with $850 million in new notes
• Potential dilution for existing shareholders if notes are exchanged for shares
• $150 million spent on share repurchases reduces cash on hand

Insights

Financial Analyst

Jazz Pharmaceuticals' $850 million offering of exchangeable senior notes is a strategic move to refinance debt and strengthen its balance sheet. The 3.125% interest rate is relatively low, indicating favorable market conditions and investor confidence. The 40% premium on the exchange price suggests optimism about Jazz's future stock performance.

The concurrent $150 million share repurchase demonstrates management's confidence in the company's valuation. This move could potentially boost earnings per share and offset dilution from potential future exchanges. However, investors should note the increased leverage and potential dilution risks if the stock price rises significantly above the exchange price.

Overall, this refinancing appears to provide Jazz with increased financial flexibility, potentially supporting future growth initiatives or acquisitions.

Legal Expert

The offering's structure as a private placement to qualified institutional buyers under Rule 144A exempts it from SEC registration requirements, streamlining the process but limiting secondary market liquidity. The notes' pari passu ranking with existing 2026 notes and subordination to secured debt protects existing creditors while maintaining flexibility for Jazz.

The redemption and repurchase provisions offer Jazz flexibility to manage its capital structure, while providing noteholders with protection against certain corporate events. The exchange rate adjustment mechanism in case of certain corporate events or redemptions adds complexity but aims to protect noteholder value.

Investors should carefully review the full terms and conditions, as this summary may not capture all material aspects of the offering.

Market Research Analyst

Jazz Pharmaceuticals' successful note offering reflects strong investor appetite for convertible securities in the current market environment. The 3.125% coupon rate is competitive, suggesting robust demand. The 40% conversion premium indicates bullish sentiment on Jazz's long-term prospects.

The concurrent share repurchase could be seen as a signal of management's belief that the stock is undervalued. This may positively influence market perception. However, the $153.05 conversion price sets a psychological target for investors, potentially influencing trading patterns.

The offering's impact on Jazz's credit profile and future financing flexibility will be important to monitor. Overall, this transaction demonstrates Jazz's ability to access capital markets on favorable terms, which could support future growth initiatives and enhance shareholder value.

DUBLIN, Sept. 4, 2024 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) ("Jazz Pharmaceuticals") today announced the pricing of $850 million aggregate principal amount of 3.125% exchangeable senior notes due 2030 (the "notes") in a private offering (the "offering") by Jazz Investments I Limited, its wholly-owned subsidiary (the "Issuer"), to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The Issuer also granted the initial purchasers of the notes an option, exercisable within a period of 13 days from and including the date the notes are first issued, to purchase up to an additional $150 million aggregate principal amount of notes. The sale of the notes is expected to close on September 6, 2024, subject to customary closing conditions.

The notes will be general unsecured obligations of the Issuer and will accrue interest payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025, at a rate of 3.125% per year. The notes will mature on September 15, 2030, unless earlier exchanged, redeemed or repurchased. Prior to June 15, 2030, the notes will be exchangeable only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The Issuer will settle exchanges by paying cash up to the aggregate principal amount of the notes to be exchanged. The remainder, if any, of the Issuer's exchange obligation in excess of the aggregate principal amount of the notes will be settled in cash, ordinary shares of Jazz Pharmaceuticals ("ordinary shares") or a combination of cash and ordinary shares, at the Issuer's election. The initial exchange rate will be 6.5339 ordinary shares per $1,000 principal amount of notes (equivalent to an initial exchange price of approximately $153.05 per ordinary share, which represents a premium of approximately 40.0% above the closing sale price per ordinary share on the Nasdaq Global Select Market on September 3, 2024), subject to adjustment in some events but not for any accrued and unpaid interest.

The Issuer's obligations under the notes will be fully and unconditionally guaranteed on a senior unsecured basis by Jazz Pharmaceuticals; will rank pari passu in right of payment with the Issuer's existing 2.000% exchangeable senior notes due 2026; will be effectively subordinated to the Issuer's guarantees of the indebtedness under Jazz Pharmaceuticals' credit agreement (the "credit agreement") and Jazz Pharmaceuticals' 4.375% senior secured notes due 2029 (the "senior secured notes") to the extent of the value of the assets securing such guarantees; and will be structurally subordinated to the indebtedness and guarantees under the credit agreement and the senior secured notes of Jazz Pharmaceuticals' other subsidiaries that are borrowers or have provided guarantees of such indebtedness.

The Issuer may redeem the notes at its option prior to September 15, 2030, in whole but not in part, in connection with certain tax-related events. The Issuer also may redeem the notes at its option on or after September 20, 2027, and prior to June 15, 2030, in whole or in part (subject to certain limitations), if the last reported sale price of the ordinary shares has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Issuer provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If Jazz Pharmaceuticals undergoes a "fundamental change," subject to certain conditions and limited exceptions, holders of the notes may require the Issuer to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of the notes or upon the Issuer's issuance of a notice of redemption, the Issuer will, in certain circumstances, increase the exchange rate for holders of the notes who elect to exchange their notes in connection with such a corporate event or exchange their notes called (or deemed called) for redemption during the related redemption period, as the case may be.

The Issuer estimates that the net proceeds from the offering will be approximately $833.7 million (or approximately $981.0 million if the initial purchasers exercise their option to purchase additional notes in full), after deducting the initial purchasers' estimated discounts and commissions and estimated offering expenses payable by the Issuer. Jazz Pharmaceuticals, together with its consolidated subsidiaries ("Jazz"), expects to use a portion of the net proceeds to prepay up to approximately $350 million aggregate principal amount of the term loans outstanding under the credit agreement and the remainder for general corporate purposes. If the initial purchasers exercise their option to purchase additional notes, Jazz expects to use the net proceeds from the sale of the additional notes for further prepayments of the term loans.

Jazz Pharmaceuticals repurchased approximately $150.0 million of its ordinary shares from purchasers of the notes in privately negotiated transactions with or through one of the initial purchasers concurrently with the pricing of the offering (the "concurrent ordinary share repurchases"). The purchase price per ordinary share repurchased in such concurrent ordinary share repurchases was $109.32 per ordinary share, which was the closing price per ordinary share on September 3, 2024. Jazz Pharmaceuticals will pay for such repurchases with existing cash on hand and such repurchases will be effected as part of Jazz Pharmaceuticals' share repurchase program announced in July 2024. Accordingly, the concurrent ordinary share repurchases reduced the remaining amount authorized under the share repurchase program.                      

The concurrent ordinary share repurchases could increase, or reduce the size of any decrease in, the market price of the ordinary shares, including concurrently with the pricing of the notes, which could have resulted in a higher effective exchange price for the notes. The closing of the notes is not contingent upon the closing of the repurchase of any ordinary shares.

None of the notes, the guarantee or the ordinary shares issuable upon exchange of the notes, if any, have been registered under the Securities Act or the securities laws of any other jurisdiction, and, unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.

This press release does not and shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of the 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 such state or jurisdiction. 

About Jazz Pharmaceuticals

Jazz Pharmaceuticals plc (Nasdaq: JAZZ) is a global biopharma company whose purpose is to innovate to transform the lives of patients and their families. We are dedicated to developing life-changing medicines for people with serious diseases — often with limited or no therapeutic options. We have a diverse portfolio of marketed medicines, including leading therapies for sleep disorders and epilepsy, and a growing portfolio of cancer treatments. Our patient-focused and science-driven approach powers pioneering research and development advancements across our robust pipeline of innovative therapeutics in oncology and neuroscience. Jazz is headquartered in Dublin, Ireland with research and development laboratories, manufacturing facilities and employees in multiple countries committed to serving patients worldwide.

Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to the closing of the offering; the expected use of the net proceeds from the offering, including any prepayment of the term loans outstanding under the credit agreement; the timing and amount of the concurrent ordinary share repurchases and the potential impacts thereof; and other statements that are not historical facts. These forward-looking statements are based on Jazz Pharmaceuticals' current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties. Do not place undue reliance on these forward-looking statements, which speak only as of the date hereof. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks and uncertainties associated with the satisfaction of closing conditions related to the offering and market risks, trends and conditions, and Jazz Pharmaceuticals' ability to complete the offering and the concurrent ordinary share repurchases on the proposed terms and timing. These and other risks and uncertainties affecting Jazz Pharmaceuticals, including those described from time to time under the caption "Risk Factors" and elsewhere in Jazz Pharmaceuticals' Securities and Exchange Commission filings and reports, including Jazz Pharmaceuticals' Annual Report on Form 10-K for the year ended December 31, 2023, as supplemented by its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, and any future filings and reports by Jazz Pharmaceuticals. Other risks and uncertainties of which Jazz Pharmaceuticals is not currently aware may also affect Jazz Pharmaceuticals' forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated. The forward-looking statements herein are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by Jazz Pharmaceuticals on its website or otherwise. Jazz Pharmaceuticals undertakes no obligation to update or supplement any forward-looking statements to reflect actual results due to any new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made.

Contacts:

Media:

Kristin Bhavnani
Head of Global Corporate Communications
Jazz Pharmaceuticals plc
CorporateAffairsMediaInfo@jazzpharma.com
Ireland +353 1 637 2141
U.S. +1 215 867 4948

Investors:

Andrea N. Flynn, Ph.D.
Vice President, Head, Investor Relations
Jazz Pharmaceuticals plc
investorinfo@jazzpharma.com
Ireland, +353 1 634 3211
U.S. +1 650 496 2717

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SOURCE Jazz Pharmaceuticals plc

FAQ

What is the size and interest rate of Jazz Pharmaceuticals' new note offering (JAZZ)?

Jazz Pharmaceuticals (JAZZ) priced $850 million of 3.125% exchangeable senior notes due 2030, with an option for an additional $150 million.

When will Jazz Pharmaceuticals' new exchangeable notes mature?

The exchangeable senior notes issued by Jazz Pharmaceuticals (JAZZ) will mature on September 15, 2030, unless earlier exchanged, redeemed, or repurchased.

What is the initial exchange rate for Jazz Pharmaceuticals' new notes (JAZZ)?

The initial exchange rate for Jazz Pharmaceuticals' (JAZZ) new notes is 6.5339 ordinary shares per $1,000 principal amount, equivalent to an initial exchange price of approximately $153.05 per share.

How much did Jazz Pharmaceuticals spend on share repurchases concurrent with the note offering?

Jazz Pharmaceuticals (JAZZ) repurchased approximately $150 million of its ordinary shares at $109.32 per share concurrently with the pricing of the note offering.

How does Jazz Pharmaceuticals plan to use the proceeds from the note offering?

Jazz Pharmaceuticals (JAZZ) plans to use about $350 million of the net proceeds to prepay term loans under its credit agreement, with the remainder for general corporate purposes.