Communications firm 8x8 ( NYSE: EGHT ) is 20.6% lower as it looks to refinance $500M in debt, and it's left out of a rack of positive initiations in the comms-as-a-service space by MKM Partners.
The company has been working on refinancing a convertible note of $500M due February 2024, and late Wednesday announced a customized capital solution led by Francisco Partners resulting in a $250M senior secured term loan facility.
In the credit agreement, 8x8 intends to use that facility to fund the cash part of an exchange of about $404M principal in the 0.50% convertible notes due 2024, and a concurrent repurchase of about $60M worth of common stock.
The $404M in existing notes was exchanged for $202M in new notes due 2028 and cash.
The term loan facility will mature in July 2027, and advances will bear interest at a secured overnight financing rate plus a margin of 6.5%. The company also issued detachable warrants exercisable for 3.1M shares of common stock to Francisco and affiliates.
MKM started 8x8 at Neutral, citing a number of headwinds, even as it started some peer names at Buy - including Ciena ( CIEN ), Infinera ( INFN ) and RingCentral ( RNG ).
"We do believe the new CEO, Dave Sipes, can realign the ship," analyst Catharine Trebnick said. But "faced with several headwinds including the current macro backdrop and $500M debt refinance, we expect the stock to trade sideways near term."
Beyond the refinancing, 8x8 has several opportunities, Trebnick said, including opportunity for growth from Microsoft Team integration and to upsell/cross-sell into the Fuze customer base.
She has a $5.50 fair value estimate; with the financing news 8x8 stock has outstripped that and fallen to $4.46 Thursday.
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Comms firm 8x8 slides 21% amid $500M refinancing