Janus Capital Group Inc. (“JCG” or the “Company”) (NYSE: JNS) today announced that it has entered into separate privately negotiated exchange agreements pursuant to which approximately $117 million aggregate principal amount of newly issued, 0.75% Convertible Senior Notes due 2018 ("New Notes") will be exchanged for $110 million aggregate principal amount of the Company's existing, 3.25% Convertible Senior Notes due 2014 ("Convertible Notes"). Following these transactions, $60 million of existing Convertible Notes will remain outstanding.
The transaction takes advantage of favorable conditions in the marketplace and allows the Company to reduce its annual interest expense, extend the existing debt maturities and increase its financial flexibility. The additional financial flexibility provided by the transaction will allow the Company to retire existing, long-term debt obligations should the opportunity arise in the future.
The New Notes will pay interest semiannually at a rate of 0.75% per annum and will be convertible, under certain circumstances, into cash, shares of JCG common stock, or a combination of cash and shares of JCG common stock, at the Company’s election. The initial conversion rate of the New Notes is 92.0598 shares of JCG common stock per $1,000 principal amount of New Notes, which is equivalent to an initial conversion price of approximately $10.86 per share of common stock, subject to adjustment in certain circumstances. This initial conversion price represents a premium of 25% relative to the closing price of $8.69 per share on June 13, 2013.
In connection with the offering of the New Notes, the Company has entered into privately negotiated convertible note hedge and warrant transactions, which in combination are intended to increase the effective conversion price under the New Notes to approximately $12.60, or a 45% premium relative to the closing price of $8.69 per share on June 13, 2013. In the event that the warrant transaction is exercised, the Company intends to repurchase JCG common shares to offset resulting dilution. The repurchase of common shares will be at JCG’s discretion, subject to market and business conditions.