EMEA Structured Equity Issue: GlobalWafers’ €345.2m bonds with warrants into Siltronic
Moving on
GlobalWafers’ visit to equity-linked in January showed the potential of the product to solve the individual issues faced by corporates. Sadly, few followed, making for a low year of EMEA structured equity issuance.
Taiwan-listed silicon wafer manufacturer GlobalWafers agreed in 2020 to buy German peer Siltronic for €4.35bn but the acquisition collapsed when all the regulatory approvals were not secured by the end of January 2022. Chip prices had risen in the interim, so pursuing the transaction would have required an increased offer and GlobalWafers opted to walk away.
It owned a 13.67% stake in the German company and while in no rush to sell, the chunky holding was no longer strategic. A block trade at a discount had little appeal, but the potential for pricing at a premium was seen as more palatable with preparation for the transaction kicking off well in advance of launch.
Sole bookrunner roles are rare in European equity-linked, as is the presence of Nomura, which ran the offer for five-year bonds with warrants. In total, 3,452 exchangeable units were on offer, with each comprising a €100,000 bond and detachable warrants making a total of €345.2m, with the 3.1m shares underlying the warrants representing 10.3% of share capital. There is an investor put for the units at three years.
Pre-sounding was required, given the lack of familiarity with both the bond-plus-warrant structure and GlobalWafers, although it had some profile due to a US$1bn CB issued in 2021.
Pricing came at the mid-point of the coupon at 1.5% and best ends for investors for a 30% premium. Siltronic shares last traded above the initial exchange price of €111.34 in February 2022.
A credit spread of 160bp was based on other Taiwanese companies and an assumed investment-grade rating. The implied volatility of 23.5% compared with 30% historically, which was impacted by the long-running M&A attempt.
While convertible bonds are typically unsecured debt, the warrants are secured on the underlying shares. As the bonds can be redeemed on exercise of the warrants, the structure was treated by investors like a typical exchangeable bond.
Hedge funds dominated though there were some quality outright orders.
In the event shares fell, with the stock ending the year down nearly 50% from the prelaunch close, so GlobalWafers will likely need another route to sell the shares. Even so it was a rare deal in the year that expanded the EMEA equity-linked universe and reminded issuers of the bonds-plus-warrants option.
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