Global Edition

Callaway Announces Refinancing Transactions

12.04am 27th August 2012 - Corporate - This story was updated on Sunday, August 26th, 2012

Chip Brewer, President and Chief Executive Officer

On Friday Callaway Golf Company (NYSE: ELY) announced that the Company entered into separate, privately-negotiated exchange agreements under which it will issue $63,227,000 in aggregate principal amount of new 3.75% Convertible Senior Notes due 2019, and 5,866,821 shares of the Company’s common stock, par value $0.01 per share, in exchange for 982,361 shares of the Company’s outstanding 7.50% Series B Cumulative Perpetual Convertible Preferred Stock, par value $0.01 per share, which has a conversion price of $7.05 per share and a liquidation preference of $100 per share.

Following the exchange transactions, 417,639 shares of the Preferred Stock will remain outstanding.

In addition, the Company entered into private placement purchase agreements under which it will receive gross cash proceeds of $46,819,205 in exchange for an additional $49,273,000 principal amount of the same 3.75% Convertible Senior Notes. The transactions are expected to close on August 29, 2012.

These new Convertible Senior Notes mature in 2019 and will pay interest of 3.75% per year on the principal amount, payable semi-annually in arrears in cash on February 15 and August 15 of each year, beginning February 15, 2013.

The Notes are convertible, at the option of the holders, at any time on or prior to the close of business on the business day immediately preceding August 15, 2019, into shares of Common Stock at a conversion rate of approximately 133.3333 shares per $1,000 in principal amount, which is equal to a conversion price of approximately $7.50 per share, subject to customary anti-dilution adjustments.

The Company has the right to terminate the conversion right any time the volume weighted average price of the Company’s shares of common stock trade above $9.75 for a specified period. The Company also has the right to redeem the Notes beginning August 15, 2015 for an amount equal to the principal balance of the notes, plus accrued and unpaid interest.

“The refinancing transactions we announced today provide significant benefits for the Company and its shareholders,” commented Chip Brewer, President and CEO of Callaway Golf. “These transactions substantially lower the Company’s cost of capital and are immediately accretive to earnings per share. At current earnings levels, these transactions are accretive by over $0.12 per share on an annualized basis.  In addition, we have raised approximately $43 million in cash, net of transaction costs, and retained our right to redeem at any time the remaining 417,639 outstanding shares of preferred stock at their liquidation preference. I am pleased we were able to enter into these transactions, which are consistent with our turnaround plan and are in addition to the cost-reduction initiatives we announced in July.”

Callaway Golf

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