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CMS ENERGY CORP 8-K Report, Financial Obligation (May 5, 2023)

Filed May 5, 2023For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation (CMS) announced on May 5, 2023, the successful completion of a private offering and sale of $800 million in aggregate principal amount of 3.375% Convertible Senior Notes due 2028. The offering was upsized by an additional $100 million due to strong demand, indicating investor confidence. These notes are senior unsecured obligations and are convertible into cash or a combination of cash and CMS Energy common stock at the company's election. The conversion price is initially set at approximately $73.97 per share, representing a premium of about 20% over the stock's trading price on May 1, 2023. This issuance allows CMS Energy to access capital while potentially deferring equity dilution. The company can redeem the notes under specific conditions after May 6, 2026, and holders have repurchase rights upon a "fundamental change."

Key Highlights

  • 1Completed offering of $800 million in 3.375% Convertible Senior Notes due 2028, with an additional $100 million purchased by initial purchasers.
  • 2Notes are senior unsecured obligations of CMS Energy, maturing on May 1, 2028.
  • 3Interest rate of 3.375% per year, payable semiannually.
  • 4Conversion option for holders starting February 1, 2028, or earlier under certain conditions.
  • 5Initial conversion rate of 13.5194 shares per $1,000 principal, equivalent to an initial conversion price of approximately $73.97 per share.
  • 6The initial conversion price represents a ~20% premium to the stock price on May 1, 2023.
  • 7CMS Energy can redeem notes on or after May 6, 2026, under specific stock price performance conditions.

Frequently Asked Questions

The primary purpose of this filing is to report CMS Energy's creation of a direct financial obligation through the sale of $800 million (plus an additional $100 million) in 3.375% Convertible Senior Notes due 2028.

The notes carry a 3.375% annual interest rate, mature in May 2028, and are convertible into cash or a combination of cash and CMS Energy common stock. The initial conversion price is approximately $73.97 per share, which is about 20% above the stock's closing price on May 1, 2023. The offering was made to qualified institutional buyers under Rule 144A.

Noteholders can convert their notes on or after February 1, 2028, until shortly before maturity, at their option. Prior to that, conversion is allowed only under specific conditions. CMS Energy has the discretion to settle conversions by paying cash, delivering shares of common stock, or a combination of both.

Yes, CMS Energy may redeem the notes on or after May 6, 2026, if the stock price meets certain performance thresholds (at least 130% of the conversion price for at least 20 trading days within a 30-day period). The redemption price would be 100% of the principal amount plus accrued interest.