JWCA advises molina healthcare on An exchange of $176.6 Million of their 3.75% convertible notes due 2014 into 1.625% convertible notes due 2044
September 2014 | READ COMPANY ANNOUNCEMENT
Transaction Background
JWCA was hired by Molina Healthcare to evaluate its capital structure. The recommendation was to push out the maturity of its existing debt by exchanging a portion of the 3.75% Convertible Notes due 2014 into 1.625% Convertible Senior Notes due 2044. In the exchange, JWCA:
Assisted the Molina team with comparative analytics around exchange consideration strategies: (1) all convertible, or (2) mix of cash + convertible + shares
Specifically designed the strategy, investor outreach and execution process to meet the company’s objectives:
- Designed the exchange strategy in order to mitigate impact on the company’s stock price
- Focused on preserving cash
- Minimized cost of execution
Assisted the team with documentation, accounting, and tax review
Led the negotiation with investors
Results
Exchanged ~95% of their 3.75% Convertible Senior Notes due 2014, thereby pushing out the refinancing at least 4 years
Achieved a 1.625% coupon, 0.375% lower than expected, saving the company ~$2.6mm in total savings (for 4 year expected life)
Obtained a tax deduction rate of 7.50% through the Contingent Pay Debt Instrument design
Delivered a smarter, more efficient execution:
- Positive stock price performance: MOH share price rose +13.6% during the execution period vs. an average decline of -8.0% for similar size convertibles
- Lower execution costs: fees were nearly 50% lower than average fees for similarly sized convertibles, saving the company ~$2.8 million
- No company marketing, so management could focus on running the business