Tech Company Finances Significant Growth through Convertible Debt

Client Situation

A public company in the online marketing services and technology business was growing at a very strong rate. Its net revenue had grown an average of 177 percent per year over the prior three years. It was also very profitable, with operating income growing an average of 195 percent per year over the same period. The company needed additional capital of about $75 million to help finance a significant acquisition it wanted to make.

Solution

In reviewing the financing alternatives, the company’s CFO, now a NextLevel team member, along with top managers decided to pursue a convertible debt offering. A shortage of high-quality convertible debt offerings in the financial markets at that time gave the company an opportunity to access this market on favorable terms.

The CFO worked with the company’s investment bank to create an attractive private convertible debt offering. The company’s strong financial position, along with conditions in the financial markets, allowed it to raise the capital it needed.

Results

  • The company raised the needed capital at a low coupon interest rate of 2.25 percent and a high conversion premium of about 45 percent.
  • By combining this financing with existing cash, the company was able to complete the acquisition.
  • The acquisition provided the basis for the company’s continued strong growth in both revenue and profit and over time drove its stock price significantly higher.
 

  • “Pacific needed a ‘been there done that’ kind of financial executive to take several large projects off the controller’s plate and get them across the finish line. NextLevel provided the right person at the right time!”

    – Tim Price, CEO, Pacific Power Group