Sunrun Inc. Announces Pricing of Offering of $475 Million of Convertible Senior Notes
February 23 2024 - 12:36AM
Sunrun Inc. (Nasdaq: RUN) (“Sunrun”) today announced the pricing
of $475 million aggregate principal amount of 4.00%
convertible senior notes due 2030 (the “notes”) in a private
placement to persons reasonably believed to be qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the “Securities Act”). Sunrun also granted the
initial purchasers of the notes the option to purchase up to an
additional $75 million aggregate principal amount of the notes
within a 13-day period beginning on, and including, the date on
which the notes are first issued. The notes will be issued at an
offering price of 99.75%. The sale of the notes is expected to
close on February 27, 2024, subject to customary closing
conditions.
The notes will be senior, unsecured obligations
of Sunrun. The notes will bear interest at a rate of 4.00% per
year. Interest will be payable semi-annually in arrears on March 1
and September 1 of each year, beginning on September 1, 2024. The
notes will mature on March 1, 2030, unless earlier converted,
redeemed or repurchased. The initial conversion rate will be
61.3704 shares of Sunrun’s common stock
per $1,000 principal amount of notes (equivalent to an
initial conversion price of approximately $16.29 per
share of Sunrun’s common stock). The initial conversion price of
the notes represents a premium of approximately 27.5% over the
$12.78 per share last reported sale price of Sunrun’s common stock
on the Nasdaq Global Select Market on February 22, 2024. The
notes will be convertible into cash, shares of Sunrun’s common
stock or a combination of cash and shares of Sunrun’s common stock,
at Sunrun’s election.
Sunrun will not be able to redeem the notes
prior to March 5, 2027. On or after March 5, 2027, Sunrun may
redeem the notes at its option if the last reported sale price of
Sunrun’s common stock has been at least 130% of the conversion
price then in effect for at least 20 trading days (whether or not
consecutive) during any 30 consecutive trading-day period
(including the last trading day of such period) ending on and
including the trading day immediately preceding the date on which
Sunrun 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, if any, to, but excluding, the
redemption date.
If a “fundamental change” (as defined in the
indenture governing the notes) occurs at any time prior to the
maturity date, holders of the notes may require Sunrun 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 special interest, if
any, to, but excluding, the repurchase date. In addition, following
certain corporate events or if Sunrun issues a notice of
redemption, Sunrun will, under certain circumstances, increase the
conversion rate for holders who convert their notes in connection
with such corporate event or notice of redemption.
Sunrun estimates that the net proceeds from the
offering will be approximately $462.8
million (or $536.0 million if the initial purchasers
exercise their option to purchase additional notes in full), after
deducting the initial purchasers’ discounts and estimated offering
expenses payable by Sunrun. Sunrun intends to use (i) approximately
$83.3 million of the net proceeds of the offering to repurchase
approximately $97.5 million aggregate principal amount of its 0%
Convertible Senior Notes due 2026 (the “2026 notes”), which Sunrun
offered to purchase at 85.5% and which is equal to approximately
$855 per each of the 2026 notes, in privately negotiated
transactions entered into concurrently with the pricing of the
offering effected with or through one of the initial purchasers of
the notes or its affiliate, (ii) approximately $37.7 million of the
net proceeds of the offering to pay the cost of the capped call
transactions, and (iii) the remainder of the net proceeds from the
offering to repay outstanding debt and for other general corporate
purposes, which may include working capital, capital expenditures,
and potential acquisitions and future transactions. However, it has
not designated any specific uses and has no definitive agreements
with respect to any material acquisition or strategic
transaction.
Holders of the 2026 notes that are repurchased
in the concurrent repurchases described above may purchase shares
of the common stock in the open market to unwind any hedge
positions they may have with respect to the 2026 notes. These
activities may increase (or reduce the size of any decrease in) the
trading price of the common stock and the initial conversion price
of the notes.
In connection with the pricing of the notes,
Sunrun entered into capped call transactions (the “capped call
transactions”) with certain of the initial purchasers or their
respective affiliates (the “option counterparties”). The capped
call transactions are expected generally to reduce the potential
dilution to Sunrun’s common stock upon any conversion of notes
and/or offset any cash payments Sunrun is required to make in
excess of the principal amount of converted notes, as the case may
be, with such reduction and/or offset subject to a cap initially
equal to approximately $22.37 per share (which represents
a premium of approximately 75% over the last reported sale price of
the common stock on the Nasdaq Global Select Market
on February 22, 2024), subject to certain adjustments under
the terms of the capped call transactions. If the initial
purchasers exercise their option to purchase additional notes,
Sunrun expects to enter into additional capped call transactions
with the option counterparties.
In connection with establishing their initial
hedges of the capped call transactions, the option counterparties
or their respective affiliates expect to purchase shares of
Sunrun’s common stock and/or enter into various derivative
transactions with respect to Sunrun’s common stock concurrently
with or shortly after the pricing of the notes. This activity could
increase (or reduce the size of any decrease in) the market price
of Sunrun’s common stock or the notes at that time.
In addition, the option counterparties or their
respective affiliates may modify their hedge positions by entering
into or unwinding various derivatives with respect to Sunrun’s
common stock and/or purchasing or selling Sunrun’s common stock or
other securities of Sunrun in secondary market transactions
following the pricing of the notes and prior to the maturity of the
notes (and are likely to do so during the observation period for
conversions of notes following December 1, 2029 and, to the extent
that Sunrun unwinds a corresponding portion of the capped call
transactions, following an early conversion of notes or repurchase
or redemption of the notes). This activity could also cause or
avoid an increase or a decrease in the market price of Sunrun’s
common stock or the notes, which could affect the ability of
noteholders to convert the notes and, to the extent the activity
occurs during any observation period related to a conversion of
notes, it could affect the number of shares and value of the
consideration that a noteholder will receive upon conversion of its
notes.
Neither the notes, nor any shares of Sunrun’s
common stock issuable upon conversion of the notes, have been, nor
will be, registered under the Securities Act or any state
securities laws and, unless so registered, such securities 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 is neither an offer to sell
nor a solicitation of an offer to buy any securities, nor shall it
constitute an offer, solicitation or sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction.
Contacts
Investor & Analyst Contact:
Patrick JobinSenior Vice President, Finance &
IRinvestors@sunrun.com
Sunrun (NASDAQ:RUN)
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