RH (RH) Says it's Exploring Potential $300 Million Convertible Notes Offering

September 12, 2019 10:54 AM EDT

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RH (NYSE: RH) announced today that it intends to explore a potential offering of $300 million aggregate principal amount of convertible notes due 2024 in a private offering to qualified institutional buyers.

In the event the Company chooses to complete the proposed $300 million offering, RH would expect to enter into convertible note hedge and warrant transactions that are designed to offset the effect of dilution from the conversion of the notes up to 100% or more of the common stock price at the time of pricing of the notes.

The proceeds from the offering would primarily be used to retire the Company’s $200 million of outstanding second lien debt, reduce outstanding borrowings under the Company’s credit facility and to pay the net costs of the convertible note hedge and warrant transactions. The retirement of the Company’s second lien debt would reduce interest expense by approximately $6.5 million in the second half of fiscal 2019, and $18 million on an annual basis, and would enable the Company to increase adjusted diluted earnings per share by approximately $0.20 to $0.25 this year, and $0.65 to $0.70 in fiscal 2020.

The interest rate, conversion price and other terms of any new issuance of notes are subject to the final pricing determination in connection with any offering. The notes would be convertible into cash, shares of RH’s common stock, or a combination thereof, at RH’s election.

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