Viavi Solutions (VIAV) saw its stock price plunge 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. 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.

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 conversion feature, coupled with the increased debt load, seems to be driving the negative market reaction in the pre-market session. Viavi stated that it expects to use the net proceeds from the cash offering for the repayment of a part of the 2026 notes due upon maturity, indicating a restructuring of its debt obligations.