Parsons Corporation (NYSE: PSN) announced today the pricing of its
private offering of $700.0 million aggregate principal amount of
its 2.625% convertible senior notes due 2029 (the “notes”). In
connection with the offering, Parsons entered into privately
negotiated capped call transactions to offset potential dilution.
Parsons also granted the initial purchasers in the offering an
option to purchase, for settlement within a 13-day period beginning
on, and including, the date on which the notes are first issued, up
to an additional $100.0 million aggregate principal amount of
notes. The sale of the notes to the initial purchasers is expected
to settle on or about February 26, 2024, subject to customary
closing conditions, and is expected to result in approximately
$683.7 million in net proceeds to Parsons, after deducting the
initial purchasers’ discount and estimated offering expenses
payable by Parsons (assuming no exercise of the initial purchasers’
option to purchase additional notes) but before deducting the cost
of the capped call transactions referred to below.
The notes will be senior unsecured obligations of Parsons. The
notes will bear interest at a rate of 2.625% per annum, payable
semiannually in arrears on March 1 and September 1 of each year,
beginning on September 1, 2024. The notes will mature on March 1,
2029, unless earlier repurchased, redeemed or converted.
The initial conversion rate for the notes is 10.6256 shares of
Parsons’ common stock per $1,000 principal amount of notes (which
is equivalent to an initial conversion price of approximately
$94.11 per share, which represents a premium of approximately 25.0%
over the last reported sale price of Parsons’ common stock on
February 21, 2024). Prior to October 1, 2028, the notes will be
convertible at the option of the holders only upon the occurrence
of specified events, and thereafter until the close of business on
the second scheduled trading day immediately preceding the maturity
date, the notes will be convertible at any time. Upon conversion,
the notes will settle for cash and, if applicable, shares of
Parsons’ common stock. Parsons may redeem for cash all or any
portion of the notes, at its option, on or after March 8, 2027 and
before the 51st scheduled trading day immediately before the
maturity date, but only if the last reported sale price per share
of Parsons’ common stock exceeds 130% of the conversion price for a
specified period of time. The redemption price will be equal to the
principal amount of the notes to be redeemed, plus accrued and
unpaid interest, if any, to, but excluding, the redemption
date.
Parsons intends to use (i) approximately $77.4 million of the
net proceeds from the sale of the notes to fund the cost of
entering into the capped call transactions described below and (ii)
a portion of the net proceeds from the sale of the notes to
repurchase a portion of its outstanding 0.25% Convertible Senior
Notes due 2025 (the “Existing Convertible Notes”) as follows: (A)
approximately $391.8 million of the net proceeds to repurchase
approximately $228.1 million Existing Convertible Notes
concurrently with the notes offering in privately negotiated
transactions effected with or through one of the initial purchasers
or its affiliate and (B) approximately $56.5 million Existing
Convertible Notes for an aggregate purchase price to be based in
part on the daily volume-weighted average price per share of
Parson’s common stock over a measurement period following the
pricing of the notes. Parsons intends to use the remainder of the
net proceeds from the offering for general corporate purposes,
including but not limited to, potential acquisitions and working
capital.
If the initial purchasers exercise their option to purchase
additional notes, Parsons expects to use a portion of the
additional net proceeds to fund the cost of entering into
additional capped call transactions as described below. Any
remaining proceeds will be used for general corporate purposes,
including but not limited to, potential acquisitions and working
capital.
Parsons expects that some or all of the holders of the Existing
Convertible Notes that are repurchased in the concurrent
repurchases described above may have entered into or unwound
various derivatives with respect to Parsons’ common stock or
purchased shares of Parsons’ common stock in open market
transactions to unwind hedge positions they may have with respect
to their investment in the Existing Convertible Notes concurrently
with the pricing of the notes or during the relevant measurement
period related to the purchase of such Existing Convertible Notes.
These transactions may have placed upward pressure on the trading
price of Parsons’ common stock, causing the common stock to trade
at higher prices than would be the case in the absence of these
transactions, which could have increased the initial conversion
price of the notes.
In connection with issuing the Existing Convertible Notes,
Parsons entered into convertible note hedge transactions (the
“existing convertible note hedge transactions”) and warrant
transactions (the “existing warrant transactions,” and, together
with the existing convertible note hedge transactions, the
“existing call spread transactions”) with certain financial
institutions (the “existing option counterparties”). In connection
with the repurchases of its Existing Convertible Notes described
above, Parsons entered into agreements with the existing option
counterparties to terminate a portion of the existing convertible
note hedge transactions in a notional amount corresponding to the
principal amount of Existing Convertible Notes repurchased. In
addition, Parsons entered into agreements with the existing option
counterparties to terminate a portion of the existing warrant
transactions with respect to a number of shares equal to the
notional shares underlying such Existing Convertible Notes
repurchased.
In connection with such terminations and the related unwinding
of the existing hedge position of the existing option
counterparties with respect to such transactions, Parsons expects
such existing option counterparties and/or their respective
affiliates may purchase or sell shares of Parsons’ common stock in
the open market and/or enter into or unwind various derivative
transactions with respect to Parsons’ common stock concurrently
with or shortly after the pricing of the notes. This activity could
affect the market price of Parsons’ common stock and could have
affected the initial conversion price of the notes. The repurchases
of the Existing Convertible Notes and the unwind of the existing
call spread transactions described above, and the potential related
market activities by holders of the Existing Convertible Notes
participating in the repurchases of the Existing Convertible Notes
and the existing option counterparties, as applicable, could
increase (or reduce the size of any decrease in) or decrease (or
reduce the size of any increase in) the market price of Parsons’
common stock, which may affect the trading price of the notes at
that time and may have affected the initial conversion price of the
notes.
In connection with the pricing of the notes, Parsons entered
into privately negotiated capped call transactions with certain of
the initial purchasers, their respective affiliates and other
financial institutions (the “option counterparties”). The capped
call transactions will cover, subject to anti-dilution adjustments
substantially similar to those applicable to the notes, the number
of shares of Parsons’ common stock underlying the notes. If the
initial purchasers exercise their option to purchase additional
notes, Parsons expects to enter into additional capped call
transactions with the option counterparties.
The cap price of the capped call transactions will initially be
$131.7575 per share, which represents a premium of 75% over the
last reported sale price of Parsons’ common stock on the New York
Stock Exchange on February 21, 2024 and is subject to customary
adjustments.
The capped call transactions are expected generally to reduce
the potential dilution to Parsons’ common stock upon any conversion
of the notes and/or at its election (subject to certain conditions)
offset any potential cash payments Parsons 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. If,
however, the market price per share of Parsons’ 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 potential cash payments, in each case, to the extent that such
market price per share exceeds the cap price of the capped call
transactions.
In connection with establishing their initial hedges of the
capped call transactions, the option counterparties and/or their
respective affiliates expect to enter into various derivative
transactions with respect to Parsons’ common stock and/or purchase
shares of Parsons’ 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 per share of Parsons’
common stock or the notes at that time.
In addition, the option counterparties and/or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to Parsons’ common stock
and/or purchasing or selling Parsons’ common stock or other
securities of Parsons in secondary market transactions following
the pricing of the notes and prior to the maturity of the notes
(and (x) are likely to do so during any observation period related
to a conversion of notes and (y) are likely to do so following any
repurchase of notes by Parsons if Parsons elects to unwind a
corresponding portion of the capped call transactions in connection
with such repurchase). This activity could also cause or avoid an
increase or a decrease in the market price per share of Parsons’
common stock or the notes, which could affect the ability to
convert the notes, and, to the extent the activity occurs following
conversion or during any observation period related to a conversion
of notes, it could affect the number of shares of Parsons’ common
stock and/or value of the consideration that noteholders will
receive upon conversion of the notes.
The offering is being made to persons reasonably believed to be
qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”). Neither
the notes nor any shares of Parsons’ common stock issuable upon
conversion of the notes have been or are expected to be registered
under the Securities Act, or under any state securities laws and,
unless so registered, may not be offered or sold in the United
States except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act
and applicable state securities laws.
This announcement does not constitute an offer to sell or the
solicitation of an offer to buy the securities described herein,
nor shall there be any sale of such securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any
such jurisdiction.
About Parsons:
Parsons (NYSE: PSN) is a leading disruptive technology provider
in the national security and global infrastructure markets, with
capabilities across cyber and intelligence, space and missile
defense, transportation, environmental remediation, urban
development, and critical infrastructure protection.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are based on our current expectations,
beliefs and assumptions, and are not guarantees of future
performance. Forward-looking statements are inherently subject to
uncertainties, risks, changes in circumstances, trends and factors
that are difficult to predict, many of which are outside of our
control. Accordingly, actual performance, results and events may
vary materially from those indicated in the forward-looking
statements, and you should not rely on the forward-looking
statements as predictions of future performance, results or events.
Numerous factors could cause actual future performance, results and
events to differ materially from those indicated in the
forward-looking statements, including, among others: any issue that
compromises our relationships with the U.S. federal government or
its agencies or other state, local or foreign governments or
agencies; any issues that damage our professional reputation;
changes in governmental priorities that shift expenditures away
from agencies or programs that we support; our dependence on
long-term government contracts, which are subject to the
government’s budgetary approval process; the size of our
addressable markets and the amount of government spending on
private contractors; failure by us or our employees to obtain and
maintain necessary security clearances or certifications; failure
to comply with numerous laws and regulations; changes in government
procurement, contract or other practices or the adoption by
governments of new laws, rules, regulations and programs in a
manner adverse to us; the termination or nonrenewal of our
government contracts, particularly our contracts with the U.S.
federal government; our ability to compete effectively in the
competitive bidding process and delays, contract terminations or
cancellations caused by competitors’ protests of major contract
awards received by us; our ability to generate revenue under
certain of our contracts; any inability to attract, train or retain
employees with the requisite skills, experience and security
clearances; the loss of members of senior management or failure to
develop new leaders; misconduct or other improper activities from
our employees or subcontractors; our ability to realize the full
value of our backlog and the timing of our receipt of revenue under
contracts included in backlog; changes in the mix of our contracts
and our ability to accurately estimate or otherwise recover
expenses, time and resources for our contracts; changes in
estimates used in recognizing revenue; internal system or service
failures and security breaches; and inherent uncertainties and
potential adverse developments in legal proceedings, including
litigation, audits, reviews and investigations, which may result in
materially adverse judgments, settlements or other unfavorable
outcomes. These factors are not exhaustive and additional factors
could adversely affect our business and financial performance. For
a discussion of additional factors that could materially adversely
affect our business and financial performance, see the factors
included under the caption “Risk Factors” in our Annual Report with
the Securities and Exchange Commission pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 for the fiscal year
ended December 31, 2023 on Form 10-K, filed on February 14, 2024
and our other filings with the Securities and Exchange Commission.
All forward-looking statements are based on currently available
information and speak only as of the date on which they are made.
We assume no obligation to update any forward-looking statement
that becomes untrue because of subsequent events, new information
or otherwise, except to the extent we are required to do so in
connection with our ongoing requirements under federal securities
laws.
Media Contact:Bernadette Miller+1
980.253.9781Bernadette.Miller@Parsons.com
Investor Relations Contact:Dave Spille+1
703.775.6191Dave.Spille@parsons.com
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