Xcel Energy has priced a $2.2 billion private offering of convertible senior notes due in December 2027, increasing the deal from an initially planned $2 billion. The utility expects to use most of the proceeds to pay down short-term borrowings, including commercial paper and loans under a delayed-draw term facility, with the remainder available for general corporate purposes.
The notes carry a 2.625% annual interest rate and can be converted into cash, Xcel shares or a combination, at the company’s choice. The sale is expected to close on November 5, subject to customary conditions.
Key details
- Offering size and proceeds: Xcel expects net proceeds of about $2.18 billion after fees and expenses. The initial purchasers can buy up to another $300 million of notes within 13 days after issuance; if they take up the full option, net proceeds would be about $2.48 billion.
- Use of funds: Proceeds are intended to repay short-term borrowings, including some commercial paper and borrowings under Xcel’s 364-day delayed-draw term loan, and to support other general corporate needs.
- Interest and maturity: The notes are senior unsecured obligations and will pay 2.625% interest annually in two installments, beginning June 15, 2027. They mature on December 15, 2027, unless converted or repurchased earlier.
- Conversion terms: The initial conversion rate is 11.4596 shares per $1,000 principal amount, equivalent to a conversion price of about $87.26 per share. That price is roughly 10% above Xcel’s closing share price on November 2.
- When holders can convert: Before September 15, 2027, conversion is permitted only under specified conditions and during certain periods. From that date, holders can convert at any time until shortly before maturity.
- How conversion is settled: Xcel will pay cash up to the principal amount being converted. For any conversion value above principal, Xcel can choose to pay cash, deliver shares or use a mix of both.
- Other protections and restrictions: If a qualifying fundamental change occurs, holders may be able to require Xcel to repurchase their notes for cash at principal value plus accrued interest. Xcel cannot redeem the notes before maturity.
What changes for investors
The transaction raises cash to reduce some of Xcel’s short-term borrowings, while replacing part of that funding with notes due in December 2027. The notes also create a potential share-conversion obligation: the initial conversion price is set above the November 2 share price, and Xcel retains the choice of how to settle any value above principal.