Solaris Energy prices $650 million convertible notes offering

HOUSTON - Solaris Energy Infrastructure, Inc. (NYSE:SEI), a $3.16 billion market cap energy infrastructure company that has delivered an impressive 245% return over the past year, has priced a $650 million offering of convertible senior notes due 2031, the company announced Tuesday. The offering size was increased from the previously announced $600 million. According to InvestingPro data, the company is currently trading near its 52-week high of $47.89, reflecting strong investor confidence in its growth strategy.

The notes will carry an interest rate of 0.25% per annum, payable semi-annually, and will mature on October 1, 2031. Settlement is expected to occur on Wednesday, according to the company’s press release statement.

Solaris estimates net proceeds of approximately $634.4 million from the offering, which could increase to $729.7 million if underwriters fully exercise their option to purchase additional notes.

The company plans to allocate approximately $57 million of the proceeds to fund capped call transactions. The remainder will be used to purchase a subordinated convertible note from its operating subsidiary, Solaris Energy Infrastructure, LLC. InvestingPro analysis indicates the company operates with a healthy current ratio of 3.11, suggesting strong liquidity to support these financial moves. With 20+ additional ProTips available on InvestingPro, investors can gain deeper insights into SEI’s financial health and growth prospects.

Solaris LLC intends to use these funds to repay approximately $354 million in outstanding debt under its term loan agreement, purchase about 80 MW of new turbine capacity for $92 million, and fund future growth capital for additional power generation equipment. This strategic move aligns with the company’s growth trajectory, as InvestingPro forecasts indicate a 77% revenue growth for the current fiscal year. The company maintains a moderate debt level, with a debt-to-equity ratio of 1.37, suggesting prudent financial management.

The notes will be convertible into cash, shares of Solaris Class A common stock, or a combination, at the company’s election. The initial conversion rate is 17.4825 shares per $1,000 principal amount, representing a conversion price of approximately $57.20 per share.

In connection with the offering, Solaris has entered into capped call transactions with financial institutions to potentially reduce dilution upon conversion of the notes.

Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, and Santander US Capital Markets LLC are serving as book-running managers for the offering, which is being made pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission.

In other recent news, Solaris Energy Infrastructure announced plans to offer $600 million in convertible senior notes due 2031. This offering, subject to market conditions, includes an option for underwriters to purchase an additional $90 million in notes. The notes will be senior unsecured obligations with interest payable semi-annually and will mature on October 1, 2031, unless repurchased, redeemed, or converted earlier. Concurrently, Morgan Stanley & Co. LLC will conduct a separate offering of borrowed shares of Solaris’s Class A common stock for hedging transactions related to the notes. Additionally, Solaris has amended its revolving credit facility with Bank of America to allow for the issuance of convertible debt, although specific details on amounts were not disclosed. In another development, Piper Sandler lowered its price target for Solaris to $50 while maintaining an Overweight rating, following Solaris’s acquisition of HVMVLV for $45-50 million. The acquisition includes $26 million in cash and approximately 700,000 shares, reflecting less than a 4x multiple based on HVMVLV’s trailing twelve-month EBITDA.

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