Crescent Energy (NYSE:CRGY) saw its shares slide in early trading after the company expanded a planned convertible bond transaction beyond its initial announcement.
In late trading Tuesday, the Houston-based oil and gas producer priced a private offering of $600 million in 2.75% convertible bonds with a five-year maturity. That amount exceeded the $400 million size the company had disclosed on Monday.
The bonds carry an initial conversion price of $14.89, which the company noted represents a 32.5% premium relative to the stock's last closing price of $11.24. Crescent Energy also said it expects to allocate about $49 million of the offering proceeds to purchase capped call transactions. The capped calls come with an initial cap price of $22.48, which is double the stock's last reported sale price on Tuesday.
Shares moved lower ahead of the market open Wednesday, with Crescent Energy slipping 2.6% to $10.95 in premarket trading following the larger-than-anticipated offering. The stock had already declined the prior session, closing down 6.4% on Tuesday after the company announced plans to use offering proceeds to redeem all of its outstanding 9.25% notes maturing in 2028.
The expanded convertible transaction follows the company’s initial disclosure earlier in the week of a $400 million deal aimed at replacing higher-cost debt. The company stated its intent to employ the new issuance in part to retire those higher-yielding notes.
Context and capital structure details
The offering’s parameters include a relatively low coupon of 2.75% and a conversion price set materially above recent trading. A portion of proceeds is earmarked for capped calls with an initial cap price that is substantially higher than the current share price, while another portion will be applied toward redeeming 9.25% notes due 2028.
Investors reacted to both the enlarged size of the convertible issue and the company’s stated redemption plan, with the stock registering declines across two consecutive sessions as those moves were disclosed.
Note: The company’s announcements provided specific figures for the offering size, coupon, conversion price, capped call allocation and cap price, and the targeted use of proceeds to redeem the outstanding 2028 notes.