Seagate closes out 2028 exchangeable notes with $150.97 million and 1.65 million shares

Seagate has finished settling its 3.50% Exchangeable Senior Notes due 2028, removing the remaining approximately $150.7 million of principal from a financing it had been retiring in stages. The final payment combined cash with 1,647,862 ordinary shares, completing the debt obligation while giving exchanging noteholders an equity stake.

Seagate HDD Cayman, the subsidiary that issued the notes, paid approximately $150.97 million in cash and delivered the shares on September 8. Parent company Seagate Technology Holdings announced completion on September 9, closing the process set in motion by a June redemption notice.

For shareholders, the settlement has two consequences: cash has left the business to repay debt, and shares have been delivered to satisfy the exchange value above principal. Understanding that division matters because the cash figure alone does not capture the consideration paid, while the share count alone does not establish the net dilution to existing owners.

Two routes to the September 8 settlement

Redemption and exchange were separate legal mechanisms. Seagate HDD called the outstanding notes for redemption on June 11, but holders retained the right to submit them for exchange before 5 p.m. New York City time on September 3.

Notes submitted by that deadline were exchanged on September 8. Their principal was paid in cash; Seagate HDD settled the obligation above principal by delivering Seagate ordinary shares, with cash in place of fractional shares where applicable. That structure preserved the principal repayment in cash while using equity for the additional value owed under the exchange terms.

Notes that were called for redemption and had not been submitted for exchange were redeemed entirely in cash at principal plus accrued and unpaid interest through September 7. Under the call terms, interest on redeemed notes ceased accruing on September 8 once the redemption price was paid.

The completion release does not divide the remaining principal between those two routes or separately quantify interest and fractional-share payments. Its approximately $150.97 million cash total includes cash for fractional shares. The difference between that total and the rounded $150.7 million principal figure therefore cannot be labeled precisely as interest, and the interest treatment stated for redeemed notes should not automatically be applied to exchanged notes.

A $1.5 billion financing retired in stages

The borrowing began in September 2023. Seagate initially priced $1.3 billion of notes at face value and offered purchasers an option for another $200 million. Its annual report confirms that the September 13 issuance totaled $1.5 billion, including the option. The notes carried a 3.50% annual coupon, paid semiannually on March 1 and September 1, and were scheduled to mature June 1, 2028.

The senior unsecured obligations were guaranteed by Seagate Technology Holdings and Seagate Technology Unlimited Company. At pricing, Seagate planned to use most of the proceeds to repay existing debt. The subsequent annual-report account confirms that proceeds repaid the entire outstanding principal of certain term loans.

Retirement accelerated through privately negotiated exchanges: $500 million of principal in November 2025, $600 million in February 2026 and approximately $186 million in May. The February closing release reported approximately $599.2 million in cash and 5.95 million shares for that transaction, leaving approximately $400 million of principal outstanding at the time.

Other holders exercised their contractual exchange rights. The annual report records $28 million of principal exchanged in May and approximately $35 million submitted in June, with the latter expected to settle in August after an observation period. These stages explain why September's $150.7 million represents the final remainder of a much larger issue.

The timing also matters when reading older tables. The annual report for the fiscal year ended July 3 showed $186 million in the notes' debt-table line and described the pending June exchanges. That historical figure is not the principal settled on September 8.

The exchange rate did not mean principal would become stock

At issuance, the notes had an initial exchange rate of 12.1253 ordinary shares per $1,000 of principal, equivalent to an exchange price of approximately $82.47. That price represented a 30% premium to Seagate's September 7, 2023 closing share price.

The rate helped determine exchange value, but the terms required cash settlement up to principal. Only the excess could be settled in cash, shares or a combination at Seagate's election. In June, the company elected shares for the excess on exchanges covered by the redemption notice.

By July 3, the annual report showed an adjusted rate of 12.1368 shares per $1,000, equivalent to about $82.39 per share and subject to further adjustment. That dated rate should not be treated as a disclosure of the final September calculation.

The financing terms permitted redemption on or after September 8, 2026, subject to a stock-price test: shares had to trade at least 130% of the applicable exchange price on at least 20 trading days within the specified 30-day period before notice. The call brought settlement forward from the scheduled 2028 maturity while preserving holders' exchange opportunity until the deadline.

Capped calls complicate the dilution picture

Seagate also purchased capped calls alongside the original financing. These separate option contracts were designed to reduce potential dilution or offset cash payments above principal under specified conditions, with protection limited by a cap.

The annual report puts their original cost at $95 million and their cap price at $107.746 per share as of July 3. It also says the earlier negotiated note exchanges did not produce a corresponding change in their $1.5 billion notional amount.

Those arrangements cannot be assumed to have canceled out September's share delivery. The completion release does not disclose a related capped-call settlement or quantify an offset. The 1,647,862 shares are the disclosed delivery to settle the notes; calculating net dilution would require an appropriate contemporaneous share count and evidence of any offsets.

There is an accounting distinction, too. Seagate's fiscal 2026 diluted earnings calculation already included a weighted-average six million shares attributable to the notes under the if-converted method. Note 11 states that the related capped calls were excluded from diluted earnings per share because their effect would have been anti-dilutive. Their potential economic offset therefore was not reflected in that calculation, and actual shares delivered in September are not a simple measure of the incremental effect on future diluted earnings per share.

Cash generation provides context; the next filing supplies the aftermath

Seagate entered the settlement period after generating $3.674 billion of operating cash flow in the 53-week fiscal year ended July 3, 2026, compared with $1.083 billion in the 52-week fiscal year ended June 27, 2025. Management attributed revenue growth to stronger demand for high-capacity nearline drives and favorable pricing. During fiscal 2026, Seagate also paid $634 million in dividends and spent $176 million on share repurchases.

Cash and cash equivalents stood at $1.704 billion on July 3, 2026, with an undrawn $1.3 billion revolving credit facility. At that date, total debt had a carrying amount of $3.565 billion net of debt issuance costs, comprising $185 million current and $3.380 billion noncurrent. Those historical carrying amounts differ from principal balances and precede subsequent debt payments: Seagate redeemed another $1 billion of senior-note principal on July 15, before September's settlement.

The next financial statements will show how those payments, operating cash flows and other capital uses changed liquidity and the share count. They will also provide the place to assess any accounting effects from the final settlement. Fiscal 2026 included a $131 million noncash induced-conversion expense on earlier negotiated exchanges; that historical charge does not establish September's accounting treatment.

The completed settlement removes this particular debt obligation. Its broader effect on cash resources and ownership will become clearer when Seagate reports the period containing the transaction.