Avnet turns to convertible issue on interest savings
Avnet, a serial high-yield issuer, pivoted into the convertible bond market Wednesday with an upsized US$550m CB, lowering borrowing costs and benefiting as a debut issuer in a new market.
JP Morgan and BNP Paribas were joint bookrunners on the pricing of the new five-year CB at a 1.75% coupon and 35% conversion premium, the aggressive ends of 1.75%–2.25% and 30%–35% talk. The banks were able to increase the size of the offer to US$550m from US$500m.
Proceeds of the CB will fund a US$100m share repurchase as well as deleveraging its large debt holdings.
The electronic components distributor previously funded in 2023 with a US$500m high-yield bond due 2028 at a 6.25% coupon.
As a result of interest-expense savings, Avnet boosted EPS by about 13 cents, a banker involved in the offering told IFR.
Avnet expects fiscal first-quarter EPS of US$0.75–$0.85, with analyst consensus for the full-year 2026 at US$4.39.
“The company is EPS-sensitive, so the interest-expense savings meant a lot,” said the banker.
Avnet, which markets, sells and distributes electronic components including semiconductors to a wide variety of industries, has been burdened by heightened interest in semiconductors and related industries, and the related increased capex.
Fitch late last month revised the BBB– rated company’s credit outlook to negative on its overlevered books. It said Avnet’s Ebitda leverage stood at 3.7 times as of June 28, exceeding Fitch’s negative threshold of three times and Avnet’s own target of 2.5 times.
Avnet shares edged up under 1% to close at US$52.43 Thursday.