Cloudflare has borrowed another $2.5bn without a coupon, and the filing lists two earlier zero interest convertibles that take the stack to $5.625bn
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Cloudflare pays no regular interest on $5.625bn of debt.
That is the position after Thursday, when the company issued $2.50bn of 0 percent convertible senior notes due 2031 under an indenture with U.S. Bank Trust Company. The ranking paragraph of the same filing lists the two that came before: $1.125bn of 0 percent notes due 2026, and $2.00bn of 0 percent notes due 2030. None of the three carries a coupon. The new notes can pay special interest, but only if the company fails its reporting obligations under the indenture or the notes stop being freely tradable as the indenture requires.
The conversion price is about $496.94 a share. The filing puts that at a premium of roughly 60 percent to the last reported sale price of $310.59 on 10 August, and at the initial conversion rate of 2.0123 shares per $1,000 of principal the whole issue stands behind 5,030,750 shares.
Net proceeds came to $2,462.3m. Of that, $259.5m went straight back out the same week to pay for capped call transactions, struck at the conversion price and capped at $854.1225 a share, a level the filing describes as 175 percent above the 10 August close. Above the cap, in the document's own words, there would nevertheless be dilution. The rest is for general corporate purposes, which the filing says may include working capital, capital expenditure, repayment of debt and acquisitions.
The covenant moved in the same week
Item 8.01 records a second amendment to the revolving credit agreement, dated 10 August, the day the notes priced. It sets at $2.0bn the cap on how much unrestricted cash, cash equivalents and available-for-sale securities may be deducted from consolidated funded indebtedness when the total net leverage ratio is worked out for certain purposes under that agreement. What the cap was before is not in the filing.
Goldman Sachs and Morgan Stanley led the purchase agreement, for $2.175bn, with an option over a further $325.0m. The initial purchasers took all of it on 11 August.
