ServiceSource International, Inc. (NASDAQ: SREV) today announced its intention to offer, subject to market conditions and other factors, $120 million aggregate principal amount of convertible senior notes due 2018 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Act”). ServiceSource also expects to grant the initial purchasers of the notes a 30-day option to purchase up to an additional $20 million aggregate principal amount of the notes to cover over-allotments, if any.
The notes will be unsecured, senior obligations of ServiceSource, and interest will be payable semi-annually. Prior to February 1, 2018, the notes will be convertible at the option of the note holders only upon the occurrence of specified events and during certain periods; thereafter until maturity the notes will be convertible at the option of the noteholders at any time. Upon conversion, the notes will be settled in cash, shares of ServiceSource’s common stock or any combination thereof at ServiceSource’s option. Final terms of the notes, including the interest rate, initial conversion rate and other terms, will be determined by negotiations between ServiceSource and the initial purchasers of the notes.
In connection with the offering of the notes, ServiceSource expects to enter into privately-negotiated convertible note hedge transactions with one or more financial institutions, which may include one or more of the initial purchasers or their respective affiliates (the “hedge counterparties”). The convertible note hedge transactions are expected generally, but not guaranteed, to reduce the potential dilution to ServiceSource’s common stock and/or offset the cash payments ServiceSource is required to make in excess of the principal amount in the event that the market price of ServiceSource’s common stock is greater than the strike price of the convertible note hedge transactions, in each case, upon conversion of the notes. ServiceSource also expects to enter into privately-negotiated warrant transactions with the hedge counterparties. The warrant transactions could separately have a dilutive effect if the market price of the Company’s common stock exceeds the strike price of the warrant transactions, unless the Company elects, subject to certain conditions, to settle the warrant transactions in cash.