Cleary Gottlieb represented Banc of America Securities LLC and Bear, Stearns & Co, Inc. as representatives of the initial purchasers in Spartan Stores, Inc.’s Rule 144A offering of $110 million of 3.375% convertible senior notes due 2027. The offering, including exercise in full of an over-allotment option, closed May 30.
One relatively new feature contained in the terms of the notes is a “full physical settlement” option. As has become customary, the note terms generally provide for “net share settlement” of any conversions, meaning that upon any conversion, Spartan Stores (1) will pay the noteholder an amount in cash equal to the lesser of the conversion obligation or the principal amount of the notes and (2) will settle any excess of the conversion obligation above the notes’ principal amount in common stock. The full physical settlement option, however, allows Spartan Stores to unilaterally and irrevocably elect to cease net share settlement and to instead settle conversions after the date of the election solely in common stock.
Spartan Stores is a leading regional grocery distributor and grocery retailer operating principally in Michigan, Ohio and Indiana.