Xero (ASX:XRO) - CEO, Steve Vamos
CEO, Steve Vamos
Source: Xero
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  • Cloud-based software platform Xero (XRO) is hoping to raise around US$600 million (approximately A$816 million) in its latest convertible note offer
  • The notes mature in December 2025 and will be exchanged for cash, based on a 75-day trading average at the time of settlement
  • The bulk of the proceeds will be used to buy back outstanding US$300 million (approximately A$408 million) convertible notes, which are due to mature in 2023
  • By settling the previously issued bonds, the company hopes “to optimise Xero’s financial structure”
  • The buyback will result in a US$30-40 million (approximately A$40.83-54.44 million ) loss, which will be marked down in Xero’s full-year 2021 financials
  • Xero closed 3.93 per cent up and is trading for $135.86 per share

Cloud-based software platform Xero (XRO) is hoping to raise around US$600 million (approximately A$816 million) in its latest convertible note offer.

The notes mature in late 2025 and will be exchanged for cash, based on a 75-day trading average at the time of settlement.

The offering will be managed by Goldman Sachs International and Morgan Stanley & Co, after the joint bookrunners managed a similar note offering for Flight Centre earlier this month. Once issued the notes will be listed on Singapore’s SGX exchange.

The company intends to settle the new notes for cash, unless holders expressly choose to settle in shares.

The bulk of the proceeds will be used to buy back US$300 million (approximately A$408 million) previously issued convertible bonds, which are due to mature in 2023.

The company is currently sourcing existing bond holders, who are willing to settle for cash or equivalent shares.

Due to the the discrepancy between the existing notes “amortised cost and fair value”, Xero anticipates the buyback will result in a US$30-40 million (approximately A$40.83-54.44 million ) loss, which will be recorded in its full-year 2021 financials.

Despite the cash hit, Xero CEO Steve Vamos believes this is the correct move for the company’s financial position.

“This announcement represents the next step in our ongoing program to optimise Xero’s financial structure as we continue to execute our strategic priorities,” he said.

Xero’s management team went on to say that the new offering and restructured convertible note liability will provide the company with additional financial flexibility to “pursue strategic investments, and deliver ongoing innovation and support of our customers and partners”.

Xero closed 3.93 per cent up and is trading at $135.86 per share.

XRO by the numbers
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