Cracker Barrel (CBRL) stock tumbles on convertible notes offering

Investing.com -- Cracker Barrel Old Country Store (NASDAQ: CBRL) shares fell 7.8% today as the company announced plans to offer $275 million in convertible senior notes due 2030 in a private offering to qualified institutional buyers. The move comes with an additional option for initial purchasers to buy up to $41.25 million more in notes within 13 days of issuance.

The notes, which are senior unsecured obligations, will pay interest semi-annually starting March 15, 2026, and will mature on September 15, 2030, unless converted, repurchased, or redeemed earlier. The company will have the option to redeem the notes in whole or in part for cash under specific conditions. The interest rate, initial conversion rate, and other terms will be determined upon pricing of the offering.

Cracker Barrel aims to use the net proceeds from this offering for general corporate purposes, which may include redeeming or repaying existing indebtedness, such as the 0.625% convertible senior notes due 2026 or amounts outstanding under the company's credit facility.

In connection with the note pricing, Cracker Barrel plans to enter into capped call transactions intended to reduce potential dilution from the conversion of the notes or to offset potential cash payments above the principal amount upon conversion. These transactions could affect the market price of Cracker Barrel's common stock or the notes, with the option counterparties or their affiliates expected to purchase Cracker Barrel's common stock or engage in derivative transactions concurrently with or shortly after the pricing of the notes.

Furthermore, in the event of repurchasing any 2026 convertible notes, Cracker Barrel may unwind a portion of existing call spread transactions, which could involve the existing option counterparties or their affiliates purchasing or selling common stock or engaging in derivative transactions. These activities could potentially impact the market value of Cracker Barrel's common stock, influencing a noteholder's ability to convert the notes, the value of the notes, and the amount and value of the shares received upon conversion.

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