Avalara Evaluates $ 850 Million Offer of Convertible Senior Notes Due 2026


SEATTLE – (COMMERCIAL THREAD) – Avalara, Inc. (NYSE: AVLR) today announced the price of its offering for a total principal amount of $ 850 million of its 0.25% convertible senior bonds due 2026 ( the “Bonds”) in connection with a private placement with qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). Avalara also granted each of the original purchasers a 13-day option to purchase up to an additional $ 127.5 million in total principal amount of the notes. Ticket sales are expected to close on August 13, 2021.

Avalara expects net proceeds from the Notes to be approximately $ 834.7 million (or $ 959.9 million if the original purchasers exercise their option to purchase additional Notes in full). Avalara expects to use approximately $ 65.5 million of the net proceeds from the Notes to pay the cost of the capped purchase transactions described below. Avalara intends to use the remainder of the net proceeds for general corporate purposes, which will likely include funding acquisitions or investments in businesses, products, services, technologies or businesses. other complementary assets, and may include an ongoing investment in its sales and marketing efforts, product development, general and administrative matters and working capital.

The Notes will be senior unsecured obligations of Avalara and will mature on August 1, 2026, unless redeemed, redeemed or converted earlier in accordance with their terms. The Notes will bear interest at a fixed rate of 0.25% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, commencing February 1, 2022.

Prior to the close of business on the business day immediately preceding February 1, 2026, the Notes are convertible at the option of the holders only under certain conditions.

From February 1, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or part of their Notes, at their option at the conversion rate then in effect, regardless of these conditions. Avalara will settle conversions of the Notes by paying for or delivering, as the case may be, in cash, shares of its common stock, or a combination of cash and shares of its common stock, at its option.

The conversion rate for the Notes will initially be 4.1940 Common Shares per $ 1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $ 238.44 per Common Share). The conversion rate and the corresponding conversion price will be subject to adjustment in certain cases, but will not be adjusted for accrued and unpaid interest. Avalara may redeem any or all of the Notes for cash, at its option, on or after August 6, 2024 and no later than the scheduled 41st Trading Day immediately prior to the Maturity Date if the last reported sale price of the Common Shares of Avalara ‘Avalara has at least 130% of the conversion price then in effect for at least 20 trading days (whether consecutive or not) in any period of 30 consecutive trading days (including the last trading day of this period) ending on the trading day included immediately preceding the date on which Avalara provides a redemption notice at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest until, but excluding the date of repayment (as defined in the act governing the notes).

If Avalara undergoes a fundamental change (as defined in the Note Indenture), subject to certain conditions, Holders may require Avalara to redeem all or part of their Notes in cash, at a redemption price equal to $ 100. % of the principal amount of the Notes to be purchased, plus accrued and unpaid interest up to, but excluding, the Fundamental Change Redemption Date (as defined in the Note Governing Act). In addition, as a result of certain corporate events that occur prior to the maturity date of the Notes or if Avalara issues a redemption notice, Avalara will, in certain circumstances, increase the conversion rate for a Holder who chooses to convert its Notes. tickets in connection with such corporate event or convert its called (or deemed to be called) tickets for reimbursement under such reimbursement notice, as applicable.

In connection with the pricing of the Notes, Avalara has entered into privately negotiated capped purchase transactions with certain of the original purchasers or their respective affiliates and certain other financial institutions (the “Capped Call Counterparties”). The capped purchase transactions will cover, subject to customary adjustments, the number of Avalara common shares initially underlying the Notes. The capped purchase transactions are expected to offset the potential dilution of Avalara common shares as a result of any conversion of the Notes, such reduction being capped. The ceiling price of the capped purchase transactions will initially be approximately $ 323.30 per share, which represents a premium of 100.0% over the last published sale price of Avalara common shares on August 10, 2021, and is subject to certain adjustments under the terms of the capped call transactions. If the initial buyers exercise their option to purchase additional tickets, Avalara expects to enter into additional capped purchase transactions with the capped call counterparties.

Avalara expects that, as part of establishing their initial hedges of the capped purchase transactions, the capped call counterparties or their respective affiliates will enter into various derivative transactions relating to the common shares of Avalara and / or purchase Avalara common shares at the same time as, or shortly thereafter, the price of the Notes. Such activity may increase (or reduce the magnitude of any decrease) in the market price of the Avalara common shares or the Notes at that time.

In addition, Avalara expects capped call counterparties or their respective affiliates to be able to modify their hedging positions by entering into or unwinding various derivatives relating to Avalara common shares and / or buying or selling securities. common shares of Avalara or other securities of Avalara in connection with secondary market transactions. from time to time prior to the maturity of the Notes (and are likely to do so on each exercise date for capped purchase transactions, which are expected to take place each trading day during the 40 trading day period beginning the 41st trading day scheduled before the maturity date of the Notes, or following any termination of part of the capped purchase transactions as part of any redemption, redemption or early conversion of the Notes). This activity could also cause or avoid an increase or a decrease in the market price of the ordinary shares of Avalara or the Notes, which could affect the ability of the holders of Notes to convert the Notes and, to the extent that the activity continues. produced as a result of a conversion or during any observation period related to a conversion of the Notes, this could affect the number of Avalara common shares and the value of the consideration that Noteholders will receive on the conversion. tickets.

In addition, if such a capped purchase transaction does not take effect, whether or not such offer of notes is completed, the capped call counterparty may unwind its hedging positions on the Avalara common shares, which could affect negatively the value of ordinary shares of Avalara and, if the Notes have been issued, the value of the Notes.

These offers are made to qualified institutional buyers in accordance with Rule 144A of the Securities Act. Any offering of the Notes will be made only by means of a private offering memorandum. None of the Avalara Notes or common shares issuable upon conversion of the Notes has been or is expected to be registered under the Securities Act or any state securities law and, unless ‘it is not registered, may not be offered or sold in the United States. or to persons in the United States, except by virtue of an exemption or in connection with a transaction not subject to the registration requirements of the Securities Act and applicable state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is illegal.

Forward-looking statements

This press release contains “forward-looking” statements based on information currently available for Avalara and Avalara’s current expectations and assumptions regarding capital market conditions, its business, the economy and other future conditions. Forward-looking statements include all statements that are not historical facts, such as statements regarding the offering of the Notes by Avalara, the potential effects of the capped purchase transactions and the intended use of the net proceeds from such offering, and can be identified by words such as “could”, “expect”, “intend”, “may”, “proposed”, “will” or similar expressions and the negative aspects of these terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual events to differ from Avalara’s plans. These risks include, but are not limited to, whether Avalara will complete the ticket offer and capped purchase transactions under expected conditions, or not at all, market and other general economic conditions, if Avalara will be able to meet the conditions required to close any ticket sales or capped purchase transactions and that management of Avalara will have broad discretion in the use of proceeds from any ticket sales, and others risks included in the section entitled “Risk Factors” in documents filed by Avalara and reports to the Securities and Exchange Commission (the “SEC”), including in Avalara’s annual report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on February 25, 2021. The forward-looking statements contained in this press release are based on what Avalara considers reasonable as of that date. Except as required by law, Avalara assumes no obligation to update these forward-looking statements as a result of new information, future events, changes in expectations or otherwise.

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