Brocade will restructure existing debt and use some proceeds for general corporate purposes.

January 9, 2015

3 Min Read

SAN JOSE, Calif. -- Brocade (NASDAQ: BRCD) announced today the pricing of $500 million principal amount of 1.375% Convertible Senior Notes due 2020 (the "Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). Brocade has also granted the initial purchasers for the offering an option to purchase up to an additional $75 million principal amount of Notes from Brocade solely to cover over-allotments, if any. The sale of the Notes is expected to close on January 14, 2015, subject to customary closing conditions.

The Notes will be unsecured, senior obligations of Brocade, and interest will be payable semi-annually in arrears on January 1 and July 1 of each year, beginning on July 1, 2015, at a rate of 1.375% per year. The Notes will mature on January 1, 2020, unless earlier repurchased or converted in accordance with their terms. The initial conversion rate will be 62.7746 shares of Brocade's common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $15.93 per share). The initial conversion price represents a premium of approximately 35% to the $11.80 per share closing price of Brocade's common stock on the NASDAQ Global Select Market on January 8, 2015. Prior to the close of business on the business day immediately preceding September 1, 2019, the Notes will be convertible at the option of holders only upon the satisfaction of certain conditions. Thereafter, the Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding maturity on January 1, 2020. The Notes will be convertible into cash, shares of Brocade's common stock, or a combination thereof, at Brocade's election.

Brocade estimates that the proceeds from this offering will be approximately $490.4 million or $564.1 million if the initial purchasers exercise their over-allotment option in full, after deducting fees and estimated expenses.

Brocade expects to use approximately $30.4 million of the net proceeds of the offering to pay the cost of the convertible note hedge transactions described below (after such cost is partially offset by the proceeds to Brocade of the warrant transactions described below). In addition, Brocade expects to use approximately $48.9 million of the net proceeds from the offering to repurchase shares of Brocade's common stock concurrently with the pricing of the offering in privately negotiated transactions effected through one of the initial purchasers or its affiliate as Brocade's agent. Brocade repurchased such shares from purchasers of Notes in the offering at a purchase price per share equal to the closing price per share of Brocade's common stock on January 8, 2015.

Brocade intends to use the remainder of the net proceeds to redeem all of Brocade's outstanding 6.875% senior secured notes due 2020 (the "2020 notes") and for general corporate purposes, including potential acquisitions and other business development activities. Concurrently with the closing of the offering, Brocade will issue a notice of redemption for the 2020 notes and irrevocably deposit proceeds from the offering sufficient to discharge the 2020 notes in full, all in accordance with the terms of the 2020 notes. In addition, concurrently with the closing of the offering, Brocade will terminate its senior secured credit facility.

Brocade Communications Systems Inc. (Nasdaq: BRCD)

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like