Penguin Solutions Inc. closed a $750 million private offering of zero-coupon convertible senior notes due 2031 after the deal was oversubscribed. The AI infrastructure company also exchanged portions of its existing 2029 and 2030 notes in concurrent transactions.
Penguin Solutions Inc. raised $750 million in zero-coupon convertible notes due 2031 in an oversubscribed offering, extending debt maturities and cutting interest costs as the AI infrastructure company refinances its balance sheet.
"Investor demand for our oversubscribed convertible notes offering allowed us to secure highly favorable economic terms for Penguin in a transaction that we believe reflect investors' confidence in our strategy," said Kash Shaikh, chief executive officer at Penguin Solutions.
The notes carry a 0.00% coupon with a 50% conversion premium and mature Aug. 1, 2031. Initial purchasers fully exercised a $100 million option. Concurrently, Penguin exchanged about $135.5 million of its 2.00% notes due 2029 and $160 million of its 2.00% notes due 2030 for cash and common stock. Capped call transactions with financial institutions prevent net dilution until the share price exceeds about $175.05, or roughly 125% above the closing price at pricing.
The refinancing reduces Penguin's cash interest expense and provides strategic flexibility to invest in its AI Factory Platform growth strategy, the company said. Net proceeds will fund the capped calls, the cash portion of the exchanges and repayment of borrowings under its existing credit agreement. Penguin shares traded at $77.21, up 20.4% over the past 30 days, though the stock pulled back about 7% from its peak after the initial announcement.
The company's memory segment, which now accounts for more than half of total revenue, more than doubled year over year to $275 million in the fiscal third quarter. Overall revenue rose 48% from a year earlier. Penguin's integrated memory products address a key bottleneck in AI inference workloads, where data throughput and latency constraints are driving demand for its CXL memory solutions, according to the company.
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