Granite Construction Incorporated (NYSE: GVA) (“Granite”) today
announced that it has closed its offering of $373.75 million
aggregate principal amount of 3.25% Convertible Senior Notes due
2030 (the “Convertible Notes”) for gross proceeds of $373.75
million. The proceeds include the full exercise of the option by
the initial purchasers to purchase an additional $48.75 million
aggregate principal amount of the Convertible Notes granted by
Granite to the initial purchasers. The Convertible Notes were sold
in a private offering to persons reasonably believed to be
qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”).
Granite estimates that the net proceeds from the offering were
approximately $364.2 million, after deducting the initial
purchasers’ discount and estimated offering expenses payable by
Granite. Granite used approximately $46.0 million of the net
proceeds from the Convertible Notes offering to pay the cost of
entering into capped call transactions in connection with the
Convertible Notes. Granite also used approximately $57.6 million of
the net proceeds from the Convertible Notes offering to repurchase
approximately $30.2 million in aggregate principal amount of its
2.75% Convertible Senior Notes due 2024 (the “2024 notes”) in
separate and individually negotiated transactions entered into
concurrently with the pricing of the offering (the “2024 notes
repurchases”). Granite intends to use the remainder of the net
proceeds from the offering to repay amounts outstanding under its
term loan and for general corporate purposes, which may include
acquisitions or share repurchases.
The Convertible Notes are general unsecured senior obligations
of Granite and will bear interest at a rate of 3.25% per annum,
payable semi-annually in arrears on June 15 and December 15 of each
year, beginning on December 15, 2024. The Convertible Notes will
mature on June 15, 2030, unless earlier converted, redeemed or
repurchased in accordance with their terms. The Convertible Notes
have an initial conversion rate of 12.8398 shares of Granite’s
common stock per $1,000 principal amount of Convertible Notes
(equivalent to an initial conversion price of approximately $77.88
per share of Granite’s common stock), subject to adjustment if
certain events occur. The initial conversion price represents a
premium of approximately 30% over the last reported sale price of
Granite’s common stock of $59.91 per share on the New York Stock
Exchange on June 6, 2024. Prior to the close of business on the
business day immediately preceding December 15, 2029, the
Convertible Notes will be convertible at the option of the holders
only upon the occurrence of certain events and during certain
periods. Thereafter, the Convertible Notes will be convertible at
the option of the holders at any time until the close of business
on the second scheduled trading day immediately preceding the
maturity date. Upon conversion, Granite will pay cash up to the
aggregate principal amount of the Convertible Notes to be converted
and pay or deliver, as the case may be, cash, shares of its common
stock or a combination of cash and shares of its common stock, at
Granite’s election, in respect of the remainder, if any, of its
conversion obligation in excess of the aggregate principal amount
of the Convertible Notes being converted.
Granite will not be permitted to redeem the Convertible Notes
prior to June 21, 2027. On or after June 21, 2027, Granite may
redeem for cash all or any portion of the Convertible Notes, at its
option, if the last reported sale price of Granite’s common stock
has been at least 130% of the conversion price then in effect for a
specified period of time, at a redemption price equal to 100% of
the aggregate principal amount of the Convertible Notes to be
redeemed, plus accrued and unpaid interest, if any, to, but
excluding, the redemption date. Holders of the Convertible Notes
will be able to require Granite to repurchase their Convertible
Notes following certain corporate transactions at a repurchase
price equal to 100% of the principal amount of the Convertible
Notes to be repurchased, plus accrued and unpaid interest, if any,
to, but excluding, the repurchase date. Following certain corporate
transactions or if Granite issues a notice of redemption, Granite
will, in certain circumstances, increase the conversion rate for a
holder that elects to convert its Convertible Notes in connection
with such corporate transaction or notice of redemption.
In connection with the pricing of the Convertible Notes and the
exercise of the initial purchasers’ option to purchase additional
Convertible Notes, Granite entered into privately negotiated capped
call transactions with certain of the initial purchasers of the
Convertible Notes or their respective affiliates and certain other
financial institutions (the “option counterparties”). The capped
call transactions will cover, subject to anti-dilution adjustments
substantially similar to those applicable to the Convertible Notes,
the number of shares of Granite’s common stock initially underlying
the Convertible Notes.
The cap price of the capped call transactions will initially be
$119.82 per share, which represents a premium of 100% over the last
reported sale price of Granite’s common stock of $59.91 per share
on the New York Stock Exchange on June 6, 2024, and is subject to
certain adjustments under the terms of the capped call
transactions.
The capped call transactions are expected generally to reduce
the potential dilution to Granite’s common stock upon any
conversion of the Convertible Notes and/or offset any cash payments
Granite is required to make in excess of the principal amount of
converted Convertible Notes, as the case may be. If, however, the
market price per share of Granite’s common stock, as measured under
the terms of the capped call transactions, exceeds the cap price of
the capped call transactions, there would nevertheless be dilution
and/or there would not be an offset of such cash payments, in each
case, to the extent that such market price exceeds the cap price of
the capped call transactions.
Granite has been advised that, in connection with establishing
their initial hedges of the capped call transactions, the option
counterparties or their respective affiliates expect to enter into
various derivative transactions with respect to Granite’s common
stock and/or purchase shares of Granite’s common stock concurrently
with or shortly after the pricing of the Convertible Notes. This
activity could increase (or reduce the size of any decrease in) the
market price of Granite’s common stock or the Convertible 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 Granite’s common
stock and/or purchasing or selling shares of Granite’s common stock
or other securities of Granite in secondary market transactions
following the pricing of the Convertible Notes and prior to the
maturity of the Convertible Notes (and are likely to do so during
any observation period related to a conversion of the Convertible
Notes, following any repurchase of the Convertible Notes in
connection with any fundamental change or redemption of the
Convertible Notes at Granite’s option or, to the extent Granite
unwinds a corresponding portion of the capped call transactions, in
connection with any other repurchase of the Convertible Notes).
This activity could also cause or hinder an increase or decrease in
the market price of Granite’s common stock or the Convertible
Notes, which could affect the holders’ ability to convert the
Convertible Notes and, to the extent the activity occurs during any
observation period related to a conversion of the Convertible
Notes, it could affect the amount of cash and the number and value
of shares of Granite’s common stock, if any, that holders will
receive upon conversion of the Convertible Notes.
Granite used approximately $57.6 million of the net proceeds to
repurchase approximately $30.2 million in aggregate principal
amount of its 2024 notes in the 2024 notes repurchases. Granite
expects that, in connection with the 2024 notes repurchases,
holders of the 2024 notes that have their 2024 notes repurchased
may enter into or unwind various derivative transactions with
respect to Granite’s common stock (including entering into
derivatives with one or more of the initial purchasers in the
Convertible Notes offering or their respective affiliates) and/or
purchase or sell shares of Granite’s common stock concurrently with
or shortly after the pricing of the Convertible Notes offering.
This activity could affect the market price of Granite’s common
stock and the initial conversion price of the Convertible Notes.
Granite cannot predict the magnitude of such market activity or the
overall effect it will have on the price of the Convertible Notes
or its common stock.
In connection with the issuance of the 2024 notes, Granite
entered into convertible note hedge transactions (the “existing
convertible note hedge transactions”) with certain financial
institutions (the “existing counterparties”), and Granite also
entered into separate warrant transactions (the “existing warrant
transactions”) with the existing counterparties. In connection with
the 2024 notes repurchases, Granite entered into partial unwind
agreements (the “Unwind Agreements”) with the existing
counterparties, concurrently with the offering, to terminate a
corresponding portion of the existing convertible note hedge
transactions and the existing warrant transactions (collectively,
the “Unwind Transactions”). In connection with the Unwind
Transactions and pursuant to the Unwind Agreements, Granite will
receive approximately 261,000 shares of Granite’s common stock in
respect of the unwind of the portion of the existing convertible
note hedge transactions and existing warrant transactions that
correspond to the 2024 notes repurchases.
In connection with the Unwind Transactions, the existing
counterparties and/or their respective affiliates may enter into or
unwind various derivative transactions with respect to Granite’s
common stock and/or purchase or sell shares of Granite’s common
stock or other securities of Granite in secondary market
transactions concurrently with or shortly after the pricing of the
Convertible Notes. This activity may affect the price of Granite’s
common stock and, in turn, impact the initial conversion price of
the Convertible Notes.
The Convertible Notes and the shares of Granite’s common stock
issuable upon conversion of the Convertible Notes, if any, have not
been and will not be registered under the Securities Act or
applicable state securities laws. As a result, neither the
Convertible Notes nor any common stock issuable upon conversion of
the Convertible Notes may be offered or sold in the United States
except pursuant to an applicable exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws. This news
release is neither an offer to sell nor a solicitation of an offer
to buy the Convertible Notes or any common stock issuable upon
conversion of the Convertible Notes, nor shall there be any sale of
any securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
Forward-looking Statements
Any statements contained in this news release that are not based
on historical facts, including statements about the use of
proceeds, Granite’s receipt of Granite’s common stock, third
parties entering into or unwinding derivative transactions with
respect to Granite’s common stock and/or purchasing or selling
Granite’s common stock, and the potential impact of the capped call
transactions, the 2024 notes repurchases, the Unwind Transactions
and third parties entering into or unwinding derivative
transactions with respect to Granite’s common stock and/or
purchasing or selling Granite’s common stock on dilution to
Granite’s stockholders or the offset of any cash payments Granite
is required to make in excess of the principal amount of converted
Convertible Notes, or the market price of Granite’s common stock or
the Convertible Notes or the initial conversion price of the
Convertible Notes constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are identified by words such as
“expects,” “estimates,” “intends,” “plans,” “potential,” “may,”
“will,” “could,” “would” and the negatives thereof or other
comparable terminology or by the context in which they are made.
These forward-looking statements are predictions reflecting the
best judgment of senior management and reflect our current
expectations regarding the use of proceeds, Granite’s receipt of
Granite’s common stock, third parties entering into or unwinding
derivative transactions with respect to Granite’s common stock
and/or purchasing or selling Granite’s common stock, and the
potential impact of the capped call transactions, the 2024 notes
repurchases, the Unwind Transactions and third parties entering
into or unwinding derivative transactions with respect to Granite’s
common stock and/or purchasing or selling Granite’s common stock on
dilution to Granite’s stockholders or the offset of any cash
payments Granite is required to make in excess of the principal
amount of converted Convertible Notes, or the market price of
Granite’s common stock or the Convertible Notes or the initial
conversion price of the Convertible Notes. These expectations may
or may not be realized. Some of these expectations may be based on
beliefs, assumptions or predictions that may prove to be incorrect.
In addition, our business and operations involve numerous risks and
uncertainties, many of which are beyond our control, which could
result in our expectations not being realized or otherwise
materially affect our business, financial condition, results of
operations, cash flows and liquidity. Such risks and uncertainties
include, but are not limited to, the effects of entering into the
capped call transactions, the 2024 notes repurchases, the Unwind
Transactions and third parties entering into or unwinding
derivative transactions with respect to Granite’s common stock
and/or purchasing or selling Granite’s common stock, market and
general conditions, and those described in greater detail in our
filings with the Securities and Exchange Commission, particularly
those described in our Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q.
Due to the inherent risks and uncertainties associated with our
forward-looking statements, the reader is cautioned not to place
undue reliance on them. The reader is also cautioned that the
forward-looking statements contained herein speak only as of the
date of this news release and, except as required by law; we
undertake no obligation to revise or update any forward-looking
statements for any reason.
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version on businesswire.com: https://www.businesswire.com/news/home/20240611516605/en/
Investors Wenjun Xu, 831-761-7861
Or
Media Erin Kuhlman, 831-768-4111
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