Solaris Energy Infrastructure to offer $600 million in convertible notes

HOUSTON - Solaris Energy Infrastructure, Inc. (NYSE:SEI), a $3.17 billion market cap energy infrastructure company currently trading near its 52-week high of $47.26, announced Monday its plan to offer $600 million in convertible senior notes due 2031, subject to market conditions. According to InvestingPro analysis, the company appears to be trading above its Fair Value, with 20+ additional insights available to subscribers. The company also expects to grant underwriters an option to purchase up to an additional $90 million in notes to cover over-allotments.

The notes will be senior, unsecured obligations with interest payable semi-annually and will mature on October 1, 2031, unless earlier repurchased, redeemed, or converted. Noteholders will have conversion rights under certain circumstances, with Solaris settling conversions through cash, shares of its Class A common stock, or a combination of both. The company maintains a healthy balance sheet with a current ratio of 3.11 and operates with a moderate debt-to-equity ratio of 1.37.

Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, and Santander US Capital Markets LLC are serving as book-running managers for the offering.

Solaris intends to use the proceeds to fund capped call transactions and to purchase a subordinated convertible note from its operating subsidiary, Solaris LLC. The subsidiary plans to use these funds to repay approximately $320.9 million in outstanding debt under its Term Loan Agreement and to fund growth capital for additional power generation equipment, including new natural gas turbines. The company has demonstrated strong growth potential, with revenue increasing by 62.66% in the last twelve months. Get detailed insights into Solaris’s growth prospects and comprehensive financial analysis through InvestingPro’s exclusive Research Reports, available for 1,400+ top US stocks.

In connection with the offering, Solaris expects to enter into privately negotiated capped call transactions with financial institutions to potentially reduce dilution to its Class A common stock upon conversion of the notes.

The company also announced a separate, concurrent offering of borrowed Class A common stock to facilitate hedging transactions by some purchasers of the notes. The completion of each offering is contingent upon the completion of the other.

Solaris Energy Infrastructure provides equipment-based solutions for distributed power generation and management of raw materials used in oil and natural gas well completion. The company serves multiple U.S. markets including energy, data centers, and other commercial and industrial sectors, maintaining a gross profit margin of 46.47% and generating $447 million in revenue over the last twelve months.

The offering is being made pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission, according to the press release statement.

In other recent news, Solaris Energy Infrastructure reported impressive second-quarter earnings, with an adjusted EBITDA of $60.6 million, surpassing analyst estimates from Raymond James and others. This earnings beat was largely attributed to the strong performance of its Power Solutions segment, which achieved an adjusted EBITDA of $45.7 million. Following this positive earnings report, Raymond James raised its price target for Solaris Energy to $41 from $38, maintaining an Outperform rating.

Additionally, Solaris Energy announced its acquisition of HVMVLV, a company specializing in electrical control and distribution equipment, for $45-50 million. This acquisition aims to enhance Solaris’s capabilities in power distribution and voltage regulation. Piper Sandler adjusted its price target for Solaris Energy to $50 from $51, maintaining an Overweight rating, following the acquisition announcement.

Furthermore, Solaris Energy revealed plans for a $600 million convertible notes offering, with an option for an additional $90 million. In another strategic move, Solaris Energy has dual listed its Class A common stock on NYSE Texas, while keeping its primary listing on the New York Stock Exchange. These developments highlight Solaris Energy’s ongoing efforts to expand and strengthen its market position.

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