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Southern Company Expands Investor Horizons with Convertible Notes

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Michael Chen

May 7, 2024 - 03:09 am

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Southern Company Announces Upsized Convertible Notes Offering Amid Growing Market Confidence

ATLANTA, May 6, 2024 /PRNewswire/ -- In a significant development, Southern Company (NYSE: SO), a premier energy enterprise, unveiled that it has set the pricing for a substantial issuance amounting to $1.3 billion of its Series 2024A 4.50% Convertible Senior Notes due June 15, 2027 ("Convertible Notes"). This private placement is directed exclusively at qualified institutional buyers according to Rule 144A under the Securities Act of 1933, as amended ("Securities Act"), and marks an expansion of $200 million from the initial offering size previously declared. As a gesture of good faith, Southern Company has also granted the initial purchasers a 13-day option post-issuance to acquire up to an additional $200 million of the Convertible Notes. The company has scheduled the closing of this offering for May 9, 2024, subject to meeting regular closing conditions.

Investors will receive interest payments on the Convertible Notes twice a year at an annual rate of 4.50%. When issued, these notes will carry an initial conversion rate of 10.8166 shares for every $1,000 of principal value, which corresponds to an initial conversion price around $92.45 for each share of common stock. This rate signals an initial conversion premium approximately 22.50% over the latest sale price of Southern Company's common stock as recorded on May 6, 2024. Depending on specific circumstances, the conversion rate may be adjusted. The Convertible Notes are set to mature on June 15, 2027, unless they are repurchased or converted in accordance with their terms before that date.

Before March 15, 2027, any conversion of the Convertible Notes will be subject to specific events and will only be permitted during particular timeframes. Following this date, conversions can be executed at any point until the close of business two days before the maturity date. In case of conversion, Southern Company has a flexible arrangement wherein it can settle in cash up to the total principal amount of the Convertible Notes and also has the option to pay or deliver additional settlement - whether it is cash, shares of common stock, or a mix of both – at its discretion, for any residual value exceeding the principal amount being converted.

The net proceeds from this strategic offering are primarily earmarked for the repayment, in full or in part, of Southern Company's existing commercial paper borrowings. Should there be surplus funds, they will be allocated towards general corporate purposes. These purposes could include investments in Southern Company's subsidiaries to continue fueling their growth and operational pursuits.

This press release does not constitute an offer to sell, nor is it a solicitation of an offer to buy these securities. Moreover, it is explicit that the sale of these important financial instruments is not lawful within jurisdictions where such offers, solicitations, or sales are considered unauthorized. The Convertible Notes, as well as the shares of common stock that might be issued contingent upon the conversion of the Convertible Notes, have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction. As such, these securities cannot be offered or sold absent registration or an exemption from these registration requirements.

Southern Company: A Synonym for Energy Excellence

Southern Company is recognized as a leading energy provider, servicing 9 million satisfied customers across the southeastern United States and beyond with the prowess of its collective companies. The empire comprises electric operating companies across three states, natural gas distribution entities within four states, a competitive generation company, and a visionary distributed energy company extending capabilities on a national front. Southern Company's portfolio also includes a state-of-the-art fiber optics network and telecommunications services, illustrating its commitment towards a diverse and future-ready energy landscape.

Forward-Looking Statements: An Executive Summary

Certain content within this announcement constitutes forward-looking statements based on projected business expectations and strategic planning. These statements envelope predictions about the forthcoming closure of the Convertible Notes offering and the anticipated deployment of the proceeds emerging from this corporate maneuver. That said, Southern Company brings attention to various factors that could potentially cause actual results to veer from those presented in the forward-looking information. The company urges readers to exercise caution and not overly rely on these projections as they do not guarantee what the future holds. Many factors influencing these forward-looking statements lie beyond Southern Company’s influence, asserting that there can be no certainty in these predictive results coming to fruition.

The influencing factors are diverse, encompassing global and U.S. economic scenarios impacted by geopolitical skirmishes, potential recessions, inflationary pressures, interest rate dynamics, and overall monetary market performances. The outcomes of Southern Company's financing efforts could also shape the resultant scenario. Accessibly to various capital markets and financial resources, the changes in Southern Company’s credit ratings, alongside natural and human-induced calamities like fires, storms, health pandemics, political turmoil, and warfare further add to the unpredictability. These considerations come on top of those detailed in Southern Company's Annual Report on Form 10-K for the year concluded on December 31, 2023, and all subsequent filings related to securities. The company clearly disclaims any duty to revise such forward-looking statements actively.

In conclusion, the formal source of this news release is attributed to Southern Company, as denoted in the press release. Interested parties may reach out to the organization with related inquiries to acquire additional insights into the subject matter of the Convertible Notes or other corporate highlights.

For more details, please visit Southern Company’s website or consult the documentation on the Securities Act of 1933, as amended, pertaining to Rule 144A governing this particular private placement.

Southern Company's move signals robust market confidence and hints at strategic fund allocation that portends a thoughtful blueprint for addressing immediate financial obligations and underpinning the expansive corporate directives. As the world increasingly pivots towards sustainable energy solutions, leading providers like Southern Company remain pivotal in orchestrating financial maneuvers that cater both to growth imperatives and responsible corporate governance. On the heels of this announcement, stakeholders and industry observers will be watching closely to see how Southern Company's financial strategies unfold and how these pivotal decisions will impact its journey towards an innovative energy future.

It is noteworthy that Southern Company’s exploitation of dynamic financing options like this Convertible Notes offering exemplifies a broad, more complex trend of blue-chip companies turning to the private placement market as a source of capital. This channel provides an alternative to traditional public offerings, enabling corporations to tap into a pool of institutional investment while simultaneously offering investors a potentially lucrative conversion premium in the form of company stock. In the case of Southern Company, the attractive conversion rate and premium underscore investor confidence in the business's solid fundamentals and its prospects for future growth.

About Southern Company:

  • Southern Company serves over 9 million customers across the Southeastern United States.
  • Owns electric operating companies in three states, natural gas distribution companies in four states.
  • Hosts a competitive generation company and a national distributed energy company.
  • Operates a comprehensive fiber optics network and telecommunications services.

For additional details about Southern Company’s services, operations, and investment opportunities, please refer to the official corporate website.

In times of economic volatility and market uncertainties, the ability of companies to secure funding through innovative financial instruments such as Convertible Senior Notes remains a testament to their financial health and operational robustness. This designated offering by Southern Company not only underscores its commitment to prudent financial management but also mirrors a prudent approach to ensuring capital is available for strategic goals, including paying off existing debt and investing in key areas of the business to fuel sustained growth.

Market participants will keep a keen eye on Southern Company's performance, especially considering the anticipation surrounding the utilization of the offering's proceeds. The successful closure of this deal could potentially lay the groundwork for others to follow suit, providing a blueprint for strategic financial planning in the energy sector. As the Convertible Notes offering nears its expected close date, Southern Company reiterates its resolute stance on steering forward with initiatives that enhance shareholder value, promote sustainability, and maintain a solid financial foundation.

Investors and stakeholders are advised to monitor Southern Company's trajectory closely, as the decisions made today will undeniably sculpt the energy landscape of tomorrow. With a firm grip over a versatile portfolio and an eye towards innovation, Southern Company is strategically positioned to navigate the complex waters of energy provision, financial strategy, and corporate development in the Southeast and beyond.

In conclusion, Southern Company’s upsized offering of Convertible Senior Notes reflects a strong market appetite for the company’s stock and a vote of confidence in its strategic direction. It is a hallmark of the company's adroitness in financial planning and a signal of its promise to reinforce its financial base while ambitiously expanding its reach in the energy domain. As Southern Company looks ahead, it does so with the assurance that comes from robust financial instruments and sagacious economic foresight, aiming to deliver not just energy, but progressive, sustainable growth for years to come.

For further information or inquiries about Southern Company, please visit the Southern Company website for comprehensive insights.