Gogo greenshoe exercise ups 6% four-year convertibles to $238 million

By Susanna Moon

Chicago, Dec. 6 – Gogo Inc. said underwriters partially exercised the over-allotment option on its 6% four-year convertible notes, bringing the total deal size to $238 million.

As reported, Gogo priced an upsized $215 million of the convertibles after the market close on Nov. 16 with a 20% initial conversion premium.

“Under the terms of the transaction, Gogo effectively extended the maturity of approximately $200 million of its outstanding convertible senior notes from March 2020 until May 2022. Approximately $162 million in convertible senior notes due 2020 remain outstanding,” according to a company update on Thursday.

“In connection with the transaction, the company's gross debt increased by approximately $38 million, offset by an approximately $28 million increase in cash on the balance sheet after the execution of the greenshoe, which closed on Dec. 5.”

An entity affiliated with Oakleigh Thorne, president and chief executive officer of Gogo, also purchased $8 million of the new 2022 convertible senior notes in a concurrent private placement.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are bookrunners for the Rule 144A deal, which carried a greenshoe of $32.25 million, increased from $30 million.

As reported, the deal was increased from a planned $200 million and came at the cheap end of talk for a coupon of 5.5% to 6% and an initial conversion premium of 20% to 25%.

The notes are non-callable. They are contingently convertible until Jan. 15, 2022.

The notes will be settled in cash, shares or a combination of both at the company’s option.

About $13 million of the convertible notes will be issued in a private placement to the company’s chief executive officer and financial adviser, J. Wood Capital Advisors LLC, according to a previous release.

Proceeds will be used to repurchase $200 million of the principal amount of the company’s 3.75% convertible notes due 2020 with remaining proceeds to be reserved for interest payments on the new notes.

In connection with the pricing, Gogo may amend the forward stock purchase transactions entered into upon the pricing of its 3.75% notes to extend their maturity.

“Over the past several months, we have been pursuing a range of solutions to address our balance sheet before the 2020 convertible senior notes become current in March of 2019,” Thorne said. “We believe this transaction strengthens Gogo's position as we continue to evaluate both strategic and financial options to maximize shareholder value.”

Gogo is a Chicago-based provider of broadband connectivity products and services for the aviation industry.

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