Teladoc Health (NYSE:TDOC) stands to reap tens of millions of dollars more than it initially planned from an upcoming convertible senior notes issue. The company announced Friday that it has upsized its flotation of such securities to $850 million, from the previous goal of $800 million.
It also set the annual interest rate of the notes, which will be 1.25%. Interest is to be paid on June 1 and Dec. 1 of every year. The notes convert to 4.1258 common shares of the company per $1,000 principal amount, equating to around $242.38 per share; that's well above the latest closing stock price of $184.23. The company has the right to settle conversions either entirely in stock, or in a mix of shares and cash.
As Teladoc stated when it initially announced the issue last week, the notes from the upcoming issue will mature on June 1, 2027 if not converted, redeemed, or purchased. It can redeem the notes starting on June 5, 2024, under certain conditions.
After fees and expenses related to the flotation are deducted, Teladoc estimates that it will bring in net proceeds of $829 million for the company. These funds are to be used to retire an existing convertible senior notes issue that matures next year (and is more expensive, with a 3% interest rate); this will be effected with a mix of the cash and shares of the company's common stock.
Teladoc will also utilize the money for "working capital and other general corporate purposes, including the repayment of certain indebtedness."
The healthcare company said the notes issue is slated to close on Tuesday, May 19.
On Friday, Teladoc shares closed 2.6% higher, beating the gains of the major equities market indexes.