Penguin Solutions Issues $750M 0.00% Convertible Notes, Repurchases Existing Debt

What Happened
Penguin Solutions, Inc. announced on July 17, 2026 that it issued $750.0 million aggregate principal amount of 0.00% Convertible Senior Notes due 2031 under an indenture with U.S. Bank Trust Company, N.A. The initial purchasers fully exercised an option to buy an additional $100.0 million of notes. The company expects net offering proceeds of about $735.1 million and has already entered related capped‑call hedges and exchange transactions to address existing debt.

Key Details

• Notes: $750.0M principal, 0.00% interest, maturity August 1, 2031; issued July 17, 2026.
• Conversion: initial rate 8.5690 shares per $1,000 principal (≈ $116.70 per share); convertible into cash and, if applicable, shares. Conversion windows include certain stock‑price thresholds, corporate events, company redemptions, and the final pre‑maturity period.
• Use of proceeds (estimated): ~$136.7M to repurchase $135.5M of 2.00% 2029 notes; ~$161.4M to repurchase $160.0M of 2.00% 2030 notes; ~$49.1M to pay for capped‑call transactions; repayment of the ~$100.0M outstanding under the company’s credit agreement; remainder for general corporate purposes.
• Capped calls: privately negotiated hedges totaling ~ $49.1M in cost; initial cap price $175.05 per share (125% premium to the July 14, 2026 stock price) to limit dilution/cash exposure on conversions.
• Exchange Transactions: concurrent private exchanges converting about $135.5M of 2029 notes and $160.0M of 2030 notes into cash (~$298.1M total) plus ~8.7M shares of common stock.
• Debt ranking: Notes are senior, unsecured obligations of the parent, equal to other senior unsecured debt, subordinated to secured debt and structurally subordinated to subsidiaries’ liabilities.

Why It Matters
This transaction materially remodels Penguin’s debt profile: it raises new, non‑interest‑bearing convertible debt, uses a significant portion of proceeds to retire higher‑coupon legacy convertible notes and to repay bank debt, and implements hedges to limit dilution if conversions occur. For investors, key takeaways are the potential future dilution tied to conversion (initial conversion price ≈ $116.70) versus the capped‑call protection (cap $175.05), the company’s reduced near‑term cash interest burden (0.00% notes), and the structural ranking of the new notes (senior unsecured but subordinated to secured creditors). The offering and related exchange transactions were announced in press releases dated July 13 and July 14, 2026 and the company cautioned that forward‑looking statements in the filing are subject to risks described in its SEC filings.