NetSuite (NYSE: N ) plans to offer $270 million worth of its convertible senior notes due 2018 to qualified institutional buyers, with the initial purchasers getting an option to buy up to $40 million more solely to cover overallotments.
While the initial conversion rate, interest rate, and certain other terms of the notes still need to be worked out between NetSuite and the institutional buyers, when the notes are eventually issued they will be senior unsecured obligations of NetSuite that will pay interest semiannually and will mature on June 1, 2018, unless first repurchased or converted.
If the note holders want to convert the notes before March 1, 2018, certain conditions would first need to be completed. Upon conversion, however, holders will receive cash, NetSuite stock, or a combination of the two at NetSuite's election. Yet holders of the notes will have the right to require NetSuite to repurchase all or some of their notes at 100% of their principal, plus any accrued and unpaid interest, if certain events occur. Those events were not specified in the press release announcing the offering.
NetSuite intends to use the net proceeds from the offering for working capital and other general corporate purposes, including acquisitions of and investments in complementary businesses, products, services, technologies, and capital expenditures. It also anticipates using a portion of the proceeds to buyback as much as $30 million of its shares either through privately negotiated transactions or on the open market.
NetSuite notes that by buying back its stock, it may increase the value of its stock or limit a decrease in it. NetSuite's shares closed at $89.52 on May 28.