Sunnova also granted the initial purchasers of the notes the option to purchase up to an additional $100 million aggregate principal amount of the notes within a 13-day period beginning on, and including, the date on which the notes are first issued. The sale of the notes is expected to close on August 19, 2022, subject to customary closing conditions.
The notes will be senior, unsecured obligations of Sunnova and will bear cash interest from August 19, 2022 at an annual rate of 2.625% payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2023. The notes will mature on February 15, 2028, unless earlier converted, repurchased or redeemed. The initial conversion rate will be 29.2039 shares of Sunnova’s common stock, par value $0.0001, per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $34.24 per share of Sunnova’s common stock). The notes will be convertible into cash, shares of Sunnova’s common stock or a combination of cash and shares of Sunnova’s common stock, at Sunnova’s election.
Sunnova will not be able to redeem the notes prior to August 20, 2025. On or after August 20, 2025, Sunnova may redeem the notes at its option if the last reported sale price of Sunnova’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including the trading day immediately preceding the date on which Sunnova provides notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
If a “fundamental change” (as defined in the indenture governing the notes) occurs at any time prior to the maturity date, holders of the notes may require Sunnova to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date. In addition, following certain corporate events or if Sunnova issues a notice of redemption, Sunnova will, under certain circumstances, increase the conversion rate for holders who convert their notes in connection with such corporate event or notice of redemption.
Sunnova estimates that the net proceeds from the upsized offering will be approximately $487.1 million (or $584.6 million if the initial purchasers exercise their option to purchase additional notes in full), after deducting the initial purchasers’ discounts and estimated offering expenses payable by Sunnova. Sunnova intends to use approximately $40.4 million of the net proceeds to pay the cost of the capped call transactions described below. Sunnova intends to use the remainder of the net proceeds for general corporate purposes, including, among other things, the funding of working capital, operating expenses, capital expenditures and the repayment of indebtedness.
In connection with the pricing of the notes, Sunnova entered into capped call transactions (the “capped call transactions”) with certain of the initial purchasers or their respective affiliates and other financial institutions (the “option counterparties”). The capped call transactions are expected generally to reduce the potential dilution to Sunnova’s common stock upon any conversion of notes and/or offset any cash payments Sunnova is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap initially equal to $46.10 (which represents a premium of 75.0% over the last reported sale price of Sunnova’s common stock on the New York Stock Exchange on August 16, 2022), subject to certain adjustments under the terms of the capped call transactions. If the initial purchasers exercise their option to purchase additional notes, Sunnova expects to enter into additional capped call transactions with the option counterparties.
In connection with establishing their initial hedges of the capped call transactions, Sunnova expects the option counterparties or their respective affiliates to purchase shares of Sunnova’s common stock and/or enter into various derivative transactions with respect to Sunnova’s common stock concurrently with or shortly after the pricing of the notes. These activities could increase (or reduce the size of any decrease in) the market price of Sunnova’s common stock or the notes at that time.
In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to Sunnova’s common stock and/or purchasing or selling Sunnova’s common stock or other securities of Sunnova in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so on each exercise date for the capped call transactions, which are expected to occur on each trading day during the 30 trading day period beginning on the 31st scheduled trading day prior to the maturity date of the notes, or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the notes). This activity could also cause or avoid an increase or a decrease in (or reduce the size of any decrease or increase in) the market price of Sunnova’s common stock or the notes, which could affect the ability of noteholders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of notes, it could affect the amount and value of the consideration that a noteholder will receive upon conversion of its notes.
Neither the notes, nor any shares of Sunnova’s common stock issuable upon conversion of the notes, have been, nor will be, registered under the Securities Act or any state securities laws and, unless so registered, such securities may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.
This press release is neither an offer to sell nor a solicitation of an offer to buy any securities, nor shall it constitute an offer, solicitation or sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.
