Cree Inc of Durham, NC, USA (which makes lighting-class LEDs, LED lighting and power semiconductors) has announced the pricing of $500m of its 0.875% convertible senior notes due 2023 in a private offering to qualified institutional buyers. In addition, it has granted the initial purchasers an option to purchase (for settlement within a 13-day period from, and including, the date on which the notes are first issued) up to a further $75m of the notes.
Sale of the notes to the initial purchasers is expected to settle on 24 August (subject to the satisfaction of customary closing conditions) and is expected to result in about $488m in net proceeds (or $561m if the initial purchasers exercise their option to purchase additional notes in full) after deducting the initial purchasers’ discount and estimated offering expenses payable by Cree.
The notes will be unsecured, senior obligations of Cree, bearing interest at a rate of 0.875% per year. Interest will be payable semi-annually in arrears on 1 March and 1 September of each year, beginning on 1 March 2019. The notes will mature on 1 September 2023, unless earlier repurchased, redeemed or converted.
Cree intends to use part of the net proceeds to repay its borrowings under its revolving credit facility and the remainder to fund capacity expansion of Wolfspeed (its Power & RF device and silicon carbide materials business), working capital needs and for general corporate purposes.
The initial conversion rate for the notes is 16.6745 shares of common stock per $1000 of notes (equivalent to an initial conversion price of about $59.97 per share). Conversions of the notes will be settled in cash, shares of Cree’s common stock or a combination thereof, at Cree’s election. The initial conversion price represents a conversion premium of about 31% over the last reported sale price of $45.78 per share of Cree’s common stock on the Nasdaq Global Select Market on 21 August.
