Viavi Solutions (VIAV) saw its stock price plummet 6.09% in pre-market trading on Thursday, following the announcement of a $250 million convertible notes offering. The company revealed plans to issue new 0.625% Senior Convertible Notes due 2031, partially in exchange for existing notes and partially for cash.

According to the company's statement, Viavi will exchange $100.9 million of the new notes for $97.5 million of its outstanding 1.625% senior notes due 2026. Additionally, it will issue $149.1 million of new notes for cash. The new notes will carry a lower interest rate of 0.625% compared to the existing 1.625% notes, potentially reducing the company's interest expenses in the long term.

While this move may improve Viavi's long-term financial flexibility, investors appear concerned about potential dilution and the company's need for additional financing. The initial conversion rate for the new notes is set at 72.5295 shares per $1,000 principal, representing a 25% premium over the recent trading price. This conversion feature, coupled with the increased debt load, seems to be driving the negative market reaction in the pre-market session. The company stated that it expects to use the net proceeds from the cash subscription for the repayment of a part of the 2026 notes due upon maturity.