Guess?, Inc. Announces Exchange of Convertible Notes
Guess?, Inc. (NYSE: GES) has recently revealed its plan to exchange approximately $67.1 million of its 2.00% convertible senior notes due in 2024 for approximately $64.8 million of 3.75% convertible senior notes due in 2028. This move is part of the company’s broader strategy to effectively manage its debt obligations. The transaction is expected to close around January 10, 2024.
New 2028 Notes and Stock Repurchase Planned by Guess
The newly issued 2028 notes by Guess will resemble the existing 2028 notes released in April 2023, sharing similar terms and CUSIP numbers. This will allow the notes to be traded interchangeably and fungible. The conversion rate for the 2028 notes has been set at approximately 40.9077 shares per $1,000 principal amount, which translates to an initial conversion price of around $24.45 per share.
In addition to the note exchange, Guess also plans to repurchase approximately 915,467 shares of its common stock, at a cost of approximately $21.1 million. The repurchase price per share will match the closing sale price of the stock on January 5, 2024, which was recorded as $23.05. These share repurchase transactions are directly aligned with the exchange of notes.
Guess Enters Bond Hedge and Warrant Transactions
Guess has entered into bond hedge and warrant transactions in conjunction with the note exchange. These transactions are designed to reduce potential dilution from the convertible notes and to offset any cash payments required upon conversion of the notes. The warrant transactions have a strike price of $41.37 per share and could potentially have a dilutive effect if the company’s stock price exceeds this threshold.
Strategic Moves Aim to Limit Dilution for Guess
The company intends to use cash on hand and proceeds from unwinding related hedge and warrant transactions from the 2024 notes to finance these strategic moves. The objective is to generally limit the dilution of Guess’s common stock upon conversion of the 2028 notes. These measures are part of the company’s broader strategy to manage its debt obligations effectively while protecting the interests of shareholders.
Important Note: 2028 Notes and Stock Not Registered
Guess has made it clear that the 2028 notes and any potential shares of common stock issued upon conversion will not be registered under the Securities Act or any state securities laws. As a result, they may not be offered or sold without proper registration or an applicable exemption from registration requirements. Guess has taken note of this legal requirement and urges stakeholders to comply accordingly.
Analyst comment
Positive news. Guess?, Inc. announces exchange of convertible notes as part of its broader strategy to manage debt obligations effectively and limit dilution for shareholders. The transaction is expected to close on January 10, 2024. Guess also plans to repurchase shares of its common stock. The company has taken note of legal requirements regarding the registration of the new notes and urges stakeholders to comply accordingly. Overall, these strategic moves are expected to have a positive impact on the market.
