{"id":27497,"date":"2024-02-22T09:41:48","date_gmt":"2024-02-22T14:41:48","guid":{"rendered":"https:\/\/www.parsons.com\/?p=27497"},"modified":"2024-02-22T09:41:52","modified_gmt":"2024-02-22T14:41:52","slug":"parsons-announces-pricing-of-700-0-million-of-convertible-senior-notes-due-2029-enters-into-concurrent-capped-call-transactions-to-offset-potential-dilution","status":"publish","type":"post","link":"https:\/\/www.parsons.com\/2024\/02\/parsons-announces-pricing-of-700-0-million-of-convertible-senior-notes-due-2029-enters-into-concurrent-capped-call-transactions-to-offset-potential-dilution\/","title":{"rendered":"Parsons Announces Pricing Of $700.0 Million Of Convertible Senior Notes Due 2029; Enters into Concurrent Capped Call Transactions to Offset Potential Dilution"},"content":{"rendered":"\n
CHANTILLY, VA, February 22, 2024 — 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 \u201cnotes\u201d). 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\u2019 discount and estimated offering expenses payable by Parsons (assuming no exercise of the initial purchasers\u2019 option to purchase additional notes) but before deducting the cost of the capped call transactions referred to below.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
The initial conversion rate for the notes is 10.6256 shares of Parsons\u2019 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\u2019 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\u2019 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\u2019 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.<\/p>\n\n\n\n
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 \u201cExisting 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\u2019s 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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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\u2019 common stock or purchased shares of Parsons\u2019 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\u2019 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.<\/p>\n\n\n\n
<\/a>In connection with issuing the Existing Convertible Notes, Parsons entered into <\/a>convertible note hedge transactions (the \u201cexisting convertible note hedge transactions\u201d) and warrant transactions (the \u201cexisting warrant transactions,\u201d and, together with the existing convertible note hedge transactions, the \u201cexisting call spread transactions\u201d) with certain financial institutions (the \u201cexisting option counterparties\u201d). 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.<\/p>\n\n\n\n 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\u2019 common stock in the open market and\/or enter into or unwind various derivative transactions with respect to Parsons\u2019 common stock concurrently with or shortly after the pricing of the notes. This activity could affect the market price of Parsons\u2019 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\u2019 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.<\/p>\n\n\n\n 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 \u201coption counterparties\u201d). 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\u2019 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.<\/p>\n\n\n\n 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\u2019 common stock on the New York Stock Exchange on February 21, 2024 and is subject to customary adjustments.<\/p>\n\n\n\n The capped call transactions are expected generally to reduce the potential dilution to Parsons\u2019 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\u2019 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.<\/p>\n\n\n\n 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\u2019 common stock and\/or purchase shares of Parsons\u2019 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\u2019 common stock or the notes at that time.<\/p>\n\n\n\n