NEXTDC (ASX: NXT) Prices A$1.1 Billion Convertible Notes

NEXTDC has priced A$1.1 billion of subordinated convertible notes, adding fresh funding for its Australian data centre development pipeline while preserving capacity under its senior debt facilities.

The notes carry a 1.75% annual coupon and mature on September 17, 2031, with interest payable semi-annually subject to the terms of the securities.

NEXTDC expects to receive about A$1.006 billion after funding related capped-call transactions, before other transaction costs.

Conversion Price Set at 32.5% Premium

The initial conversion price has been set at A$16.695 a share, representing a 32.5% premium to NEXTDC’s A$12.60 reference share price.

The notes are initially convertible into about 65.9 million ordinary shares, subject to customary adjustments. NEXTDC can elect to settle conversions in cash rather than issuing equity.

The securities are direct, unsecured and subordinated obligations of the company. They rank behind NEXTDC’s senior debt and alongside A$750 million of subordinated notes issued in April.

They rank ahead of the company’s hybrid securities and ordinary shares. Investors also have the right to require repayment on September 17, 2029.

Chief Executive Officer Craig Scroggie said the raising provided committed funding for NEXTDC’s development pipeline while broadening its investor base and preserving balance-sheet flexibility.

Capped Calls Reduce Dilution Exposure

NEXTDC has also spent A$93.61 million on cash-settled call options with two financial institutions designed to offset some of the economic dilution associated with the notes.

The capped calls have a strike price of A$16.695 and a cap price of A$21.42, providing protection against share-price appreciation within that range.

The hedge does not reduce the number of shares that could be issued if NEXTDC elects to physically settle conversions. The company also remains exposed to dilution from any increase in its share price above A$21.42.

The options expire alongside the notes in September 2031.

Separately, about 18.6 million existing NEXTDC shares were placed at A$12.60 apiece to help convertible-note investors establish initial hedging positions.

The placement was priced at a 1.5% discount to NEXTDC’s September 9 close. No new shares were issued and NEXTDC received no proceeds, leaving its issued capital unchanged.

Funding Supports Expansion Pipeline

The raising strengthens NEXTDC’s funding position as it continues an Australian expansion program requiring substantial upfront investment before new data centre capacity begins contributing earnings.

Proceeds will first fund the capped-call transactions and other transaction costs, with the balance allocated to the company’s Australian development pipeline and general corporate purposes.

NEXTDC reported pro forma liquidity of A$8.676 billion at June 30, including A$876 million of cash and A$7.1 billion of undrawn senior debt facilities.

Including the convertible-note raising, liquidity would have been about A$9.776 billion before transaction and capped-call costs. The pro forma figure has not been audited or reviewed.

Settlement is expected on September 17, subject to customary conditions. The notes are expected to be listed on the Vienna Multilateral Trading Facility rather than the ASX.