Dropbox, Inc. announced its intention to offer $1.0 billion aggregate principal amount of convertible senior notes due 2031 in a private placement to qualified institutional buyers.
Use of proceeds
Dropbox intends to use a portion of the net proceeds from the offering to pay the cost of convertible note hedge transactions, offset in part by proceeds from warrant transactions.
The company also plans to repurchase approximately $175.0 million of its Class A common stock from institutional investors concurrently with pricing.
Dropbox expects to use the remaining proceeds together with cash on hand to repay at least $750.0 million of outstanding borrowings under its term loan facility.
Offering structure and hedge transactions
The notes will be senior, unsecured obligations of Dropbox with interest payable semi-annually in arrears. Upon conversion, Dropbox will pay cash up to the principal amount and deliver cash, Class A common stock, or a combination for any remaining obligation.
Dropbox expects to grant initial purchasers a 13-day option to buy up to an additional $150.0 million aggregate principal amount of notes.
In connection with the offering, Dropbox expects to enter into convertible note hedge and warrant transactions with option counterparties to offset potential dilution to Class A common stock.
Key facts and where they come from
- Dropbox intends to offer $1.0 billion in convertible senior notes due 2031.
announced its intention to offer, subject to market conditions and other factors, $1.0 billion aggregate principal amount of convertible senior notes due 2031
- Dropbox expects to use remaining proceeds and cash on hand to repay at least $750.0 million in term loan debt.
expects to use the remaining proceeds from the offering, together with cash on hand, for the repayment of at least $750.0 million aggregate principal amount of outstanding borrowings
- Dropbox plans to buy back approximately $175.0 million of Class A common stock.
repurchase approximately $175.0 million of the Class A common stock from institutional investors through one of the initial purchasers of the Notes or their affiliates
The catch
- The interest rate, conversion rate, and other terms of the notes will only be determined upon pricing of the offering.
- The offering is subject to market conditions and other factors, and there is no guarantee it will close as planned.
