Shares of Plug Power (NASDAQ:PLUG) stock are in the spotlight after the company released a Form 8-K detailing a note exchange. On March 12, Plug entered into privately negotiated exchange agreements with some owners of its 3.75% convertible senior notes due in 2025. In exchange for $138.81 million of the 2025 notes, Plug will provide the holders with $140.39 million of its new 7% convertible senior notes due in 2026. In the 8-K Plug stated:
“The conversion rate for the New Notes will initially be 235.4049 shares of the Company’s common stock per $1,000 principal amount of New Notes, which is equivalent to an initial conversion price of approximately $4.25 per share of common stock, which represents a premium of approximately 20% over the last reported sale price of Plug’s common stock.”
The transaction is expected to close on March 20. Afterwards, $58.5 million of the 2025 notes will still be outstanding.
PLUG Stock: Plug Announces Notes Exchange
PLUG stock is sinking lower on the news, as the new notes carry a much higher interest rate than the 2025 notes. On top of that, the new notes can be converted to PLUG stock, cash, or a combination of both on or after Dec. 1, 2025. Before Dec. 1, 2025, the notes can be converted only if certain conditions are satisfied during certain periods.
If Plug experiences a “fundamental change” before the 2026 notes mature, the holders “may require” Plug to repurchase the notes for cash equal to 100% of the principal amount of the notes. Plug may also redeem the notes on or after June 25, 2025, if certain conditions are met.
The green hydrogen industry is extremely capital-intensive, so these notes will allow Plug to continue its operations. Plug had previously issued a going concern warning back in the third quarter after stating that its cash on hand would not be able to sustain operations for the next 12 months. The company removed the warning during its Q4 earnings.
In addition, Plug announced in January that it was in the process of receiving a $1.6 billion loan from the U.S. Department of Energy. CFO Paul Middleton expects the loan to close during Q3 of this year.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
