Advanced Energy plans $1 billion convertible notes offering

Advanced Energy Industries (NASDAQ: AEIS) announced plans to offer $1 billion in convertible senior notes due 2031 through a private placement to qualified institutional buyers. The company also expects to grant initial purchasers an option to buy an additional $150 million of the notes.

The Denver-based power conversion equipment manufacturer will use proceeds to pay for capped call transactions and to exchange portions of its existing 2.50% senior convertible notes due 2028. Remaining proceeds will fund general corporate purposes, including potential retirement of additional 2028 convertible notes.

The new notes will be senior unsecured obligations ranking equal to existing debt including the 2028 convertible notes. They will pay interest semiannually and mature May 15, 2031, unless converted, redeemed or repurchased earlier. The conversion rate and other terms will be determined through negotiations with initial purchasers.

Advanced Energy plans to enter capped call transactions with initial purchasers or affiliates to reduce potential dilution from note conversions. The company expects to separately negotiate exchanges of 2028 convertible notes for cash and common stock, though no assurance exists regarding the amount or terms of such exchanges.

The company will unwind existing convertible note hedge and warrant transactions corresponding to any exchanged 2028 notes. These activities, along with related derivative transactions by counterparties, could affect the stock price and initial conversion price of the new notes.

The notes and any shares issuable upon conversion have not been registered under the Securities Act and will be offered only under applicable exemptions from registration requirements.

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