SunPower (SPWR) Announces That Stock Price Has Hit Trigger To Allow Conversion Of $200M Senior Convertible Debentures Due 2027

SunPower announced today that the price of its A common stock has been greater than or equal to S70.94 for 20 out of the past 30 days. $70.94/share is 125% of the conversion price for one series of SunPower’s senior convertible debentures. The series in question is a $200 million aggregate principal amount of 1.25% senior convertible debentures due 2027. Holders of this series of debentures may convert them if they wish, starting in the company’s fourth quarter. Right now, according to MSN Money, the market value of the debentures is higher than the conversion value. However, some holders may choose to convert based solely on current market conditions. The principal amount would be converted into cash, and the rest of the conversion obligation would be satisfied with shares of SunPower’s class A common stock.

Because the debentures are now convertible, they will appear as short-term debt on the company’s balance sheet, although they can be reclassified next quarter if the stock price conversion test isn’t met. Per MSN Money, here is how this could impact the company:

SunPower’s principal current sources of liquidity are cash on its balance sheet, cash generated by operations and borrowings under its credit facilities. Based on SunPower’s current financial condition, management believes that liquidity from these sources, combined with the potential availability of future sources of funding, including accessing debt and equity markets, will be adequate to fund SunPower’s current and long-term debt obligations, and fund its planned capital expenditures and business plans over the next 12 months. If a significant number of debentures were to be submitted for conversion, however, SunPower may need to take steps to enhance liquidity or pursue other courses of action with respect to the debentures.

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