What is the size and pricing of the new convertible notes?

Southern Company priced $1.45 billion of Series 2025A 3.25% Convertible Senior Notes due June 15, 2028, an upsize of $200 million, with an initial conversion rate of 8.8077 shares per $1,000 principal (about $113.54 per share). The initial purchasers also have an option for up to an additional $200 million.

Why is Southern Company issuing these notes?

The company is using about $1.25 billion of the net proceeds to repurchase portions of its existing 2025 and 2027 convertible notes, and the remainder will repay commercial paper and fund general corporate purposes, including investments in subsidiaries.

How could this affect existing shareholders?

Shareholders face potential dilution if the notes convert into shares above the $113.54 conversion price, though the company can settle principal in cash. Hedging activity by holders of existing converts, such as short-selling or unwinding derivatives, could temporarily pressure the stock price or raise the effective conversion price.

When will the offering close and when do the notes mature?

The offering is expected to close on May 23, 2025, subject to customary closing conditions. The notes mature on June 15, 2028, unless repurchased or converted earlier, and pay semiannual interest at 3.25%.

Are the note repurchases guaranteed to be complete?

No. The company stated there is no assurance how much of the existing converts will be repurchased or on what terms, and it may repurchase additional existing notes after the offering closes.

SOUTHERN CO 8-K SEC Disclosure

01—Abstract

Summary

Summary of the 8-K filed May 21, 2025. Cited figures are marked; the original filing is the authoritative source.

Southern Company (NYSE: SO) priced $1.45 billion^a of Series 2025A 3.25% Convertible Senior Notes due June 15, 2028, upsized by $200 million, in a Rule 144A private offering announced May 20, 2025.

The initial purchasers hold an option for up to an additional $200 million^b, which would bring total proceeds to roughly $1.63 billion net. The offering is expected to close May 23, 2025. The notes carry an initial conversion price of about $113.54 per share, a roughly 25% premium to the May 20 closing price, and upon conversion the company will settle principal in cash, with the excess conversion value payable in cash, shares, or a combination at its election.

The company expects net proceeds of about $1.44 billion^c (about $1.63 billion with the option), and intends to use roughly $1.25 billion to repurchase about $781.6 million of its 3.875% Convertible Notes due December 2025 and about $328.1 million of its 4.50% Convertible Notes due June 2027 through privately negotiated transactions. The remaining proceeds will repay commercial paper and fund general corporate purposes, including investment in subsidiaries. The refinancing extends maturities and shifts near-term debt, while the exchange of existing converts can create hedging activity in SO common stock that may affect its trading price.

For investors, the key items are the lower coupon relative to the existing converts being retired, the extended maturity profile, the conversion premium, and the potential dilution and stock-price effects tied to convertible arbitrage unwinds. The filing does not disclose the amount of the existing converts ultimately repurchased beyond the amounts stated, and the closing and option exercise remain subject to customary conditions.

02—Key points

Key Highlights

Priced $1.45 billion of 3.25% Convertible Senior Notes due June 15, 2028, upsized by $200 million, with a further $200 million option for initial purchasers
Initial conversion price of approximately $113.54 per share, a ~25% premium to the May 20, 2025 closing price
About $1.25 billion of proceeds earmarked to repurchase $781.6 million of 2025 converts (3.875%) and $328.1 million of 2027 converts (4.50%)
Expected net proceeds of about $1.44 billion ($1.63 billion if the option is fully exercised)
Remaining proceeds to repay commercial paper and fund general corporate purposes, including subsidiary investment
Company may settle principal in cash upon conversion, with excess value settled in cash, shares, or both at its election
Note repurchases may prompt convertible arbitrage hedging that could pressure SO shares or raise the effective conversion price

03—Questions

Frequently Asked Questions

What is the size and pricing of the new convertible notes?
Southern Company priced $1.45 billion of Series 2025A 3.25% Convertible Senior Notes due June 15, 2028, an upsize of $200 million, with an initial conversion rate of 8.8077 shares per $1,000 principal (about $113.54 per share). The initial purchasers also have an option for up to an additional $200 million.
Why is Southern Company issuing these notes?
The company is using about $1.25 billion of the net proceeds to repurchase portions of its existing 2025 and 2027 convertible notes, and the remainder will repay commercial paper and fund general corporate purposes, including investments in subsidiaries.
How could this affect existing shareholders?
Shareholders face potential dilution if the notes convert into shares above the $113.54 conversion price, though the company can settle principal in cash. Hedging activity by holders of existing converts, such as short-selling or unwinding derivatives, could temporarily pressure the stock price or raise the effective conversion price.
When will the offering close and when do the notes mature?
The offering is expected to close on May 23, 2025, subject to customary closing conditions. The notes mature on June 15, 2028, unless repurchased or converted earlier, and pay semiannual interest at 3.25%.
Are the note repurchases guaranteed to be complete?
No. The company stated there is no assurance how much of the existing converts will be repurchased or on what terms, and it may repurchase additional existing notes after the offering closes.

04—Continue

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