Automotive auction giant KAR Global said it plans to offer $550 million in new convertible preferred stock.
The company said funds raised from the transaction will go toward general operations and sustaining its technology platforms amid the wholesale sector's recovery from the coronavirus pandemic.
The preferred stock has a 7.0 percent dividend that will be paid in kind for eight quarters after the transaction closes and then will be paid in cash or in kind, at KAR's option.
The shares have an initial conversion price of $17.75 per share, which is about a 42 percent premium of the stock's closing price of $12.52 on Friday, May 22.
Shares in KAR surged on the news, rising 8.4 percent to $13.57 in early trading Tuesday.
KAR closed its wholesale auctions for about two weeks in late March and early April and has since been running digital-only auctions. Wholesale activity was down sharply at the onset of the coronavirus crisis but has since been slowly rebounding.
"KAR took early and decisive steps in response to COVID-19 to protect the safety of our employees and customers, preserve our capital position and keep our operations moving forward," KAR CEO Jim Hallett said in a statement Tuesday. He added that the transaction will help the company continue to support its global customers while furthering its digital transformation.
The investment announced Tuesday was led by funds advised by Apax Partners, with participation by Periphas Capital.
"KAR is an internationally recognized leader in wholesale remarketing with a strong track record of innovation," Roy Mackenzie, partner at Apax Partners, said in the release. "The company's market leading digital platforms and investments in data analytics uniquely position them to thrive in the new digital normal."
