Convertible Debt Terms - Survey of Market Trends - 2019/2020

Fenwick & West LLP

The convertible debt market has remained remarkably stable over the last 15 months, despite considerable economic uncertainty related to the COVID-19 pandemic. Fenwick’s latest Convertible Debt Terms – Survey of Market Trends analyzes more than 100 issuer-side convertible debt transactions covering the period from January 1, 2019, through March 30, 2020. Serving as a resource for startup founders, investors and others interested in convertible debt market trends, this report also includes a snapshot comparison of the full report period through Q2 2020.

Key Findings -

- Year over year, deal sizes are down slightly—from $1.62 million to $1.58 million—with the exception of late-stage deals.

- Q2 2020, however, saw an increase in deal size and interest rate over the median from the 2019-2020 reporting period, likely a result of companies looking to extend their runway in response to COVID-19.

- Conversion discounts remain the norm, even in later stage debt issuances.

- Valuation caps remain standard practice for more than 80% of “first money” transactions, but drop steeply at later stages.

- In change-of-control situations, such as the sale of a company, most deals provide for a premium payout that is a multiple on top of the repayment of the principal balance. In fact, as many as 68% of late-stage bridge transactions contain a change of control premium.

Please see full Report below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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