Guess aims to manage debt with new convertible note terms

LOS ANGELES – Guess?, Inc. (NYSE: GES) has announced the exchange of approximately $67.1 million in principal amount of its 2.00% convertible senior notes due in 2024 for roughly $64.8 million in principal amount of 3.75% convertible senior notes due in 2028. This transaction, expected to close around January 10, 2024, is part of the company’s broader strategy to manage its debt obligations.

The new 2028 notes will be similar to the existing 2028 notes issued by Guess (NYSE:) in April 2023, featuring the same terms and CUSIP number, which will allow them to trade interchangeably and be fungible. The conversion rate for the 2028 notes is set at approximately 40.9077 shares per $1,000 principal amount, equivalent to an initial conversion price of about $24.45 per share.

Guess also plans to repurchase 915,467 shares of its common stock, costing approximately $21.1 million, as part of the share repurchase transactions aligned with the exchange. The repurchase price per share will match the closing sale price of the stock on January 5, 2024, which was $23.05.

In conjunction with the note exchange, Guess entered into bond hedge and warrant transactions. These are designed to reduce potential dilution from the convertible notes and to offset any cash payments required upon conversion of the notes. The warrant transactions have a strike price of $41.37 per share and could potentially have a dilutive effect if the company’s stock price exceeds this threshold.

The company expects to use cash on hand and proceeds from the unwinding of related hedge and warrant transactions from the 2024 notes to finance these strategic moves. It is anticipated that these transactions will generally limit dilution of the company’s common stock upon conversion of the 2028 notes.

In connection with the issuance of the 2024 notes, Guess had previously entered into hedge and warrant transactions, a portion of which were terminated in April 2023. The remaining transactions are expected to be terminated in relation to the amount of 2024 notes exchanged.

The company has made it clear that the 2028 notes and any shares of common stock potentially issued upon conversion will not be registered under the Securities Act or any state securities laws, and may not be offered or sold without registration or an applicable exemption from registration requirements.

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