VIAVI Swaps $103M in Debt for Equity to Fortify Financial Future

CHANDLER, Ariz. – December 16, 2025 – In a decisive move to strengthen its financial foundation, VIAVI Solutions Inc. (NASDAQ: VIAV) announced today it has entered into private agreements to exchange a significant portion of its convertible debt for company stock. The transaction will see $103.463 million of its 1.625% Convertible Senior Notes due 2026 converted into 7,871,043 shares of common stock, a strategic maneuver aimed at deleveraging its balance sheet and accelerating the repayment of a major term loan.

This debt-for-equity swap, priced at $17.88 per share, is expected to close around December 22, 2025. While VIAVI will not receive any cash proceeds, the move is a critical component of its plan to prepay at least $100 million of its $600 million Term Loan Credit Facility over the coming year. This proactive financial management signals a clear focus on long-term stability and capital structure optimization following a period of strategic expansion.

A Proactive Strategy to De-Risk the Balance Sheet

The exchange significantly reduces VIAVI's outstanding convertible debt, leaving only approximately $49 million of the 2026 notes on its books. By converting debt to equity, the company not only lowers its overall leverage but also cuts future interest expenses, freeing up cash flow for other corporate priorities. This isn't an isolated event but part of a consistent strategy; in August 2025, VIAVI executed a similar exchange that reduced its annual interest payments by an estimated $1.6 million, demonstrating a pattern of disciplined financial oversight.

This latest transaction is expected to further improve key financial metrics that are closely watched by investors and credit rating agencies. The company's interest payments are already considered well-covered, with an EBIT-to-interest expense ratio of 5x. Reducing the debt load will likely bolster this and other credit-related ratios, enhancing the company’s financial flexibility. Analysts see the move as a prudent step to de-risk the balance sheet, especially in the context of the substantial term loan the company took on just two months ago.

“This is a classic capital structure optimization play,” noted one market analyst familiar with the sector. “By retiring convertible debt now, VIAVI cleans up its liabilities and demonstrates to the market that it is serious about managing the leverage it took on for its recent acquisition. It’s a signal of confidence in their operational cash flow to service the remaining debt and a commitment to shareholder value through a healthier financial profile.”

The Trade-Off: Weighing Dilution Against Financial Health

While the long-term benefits of a stronger balance sheet are clear, the immediate consequence for existing shareholders is dilution. The issuance of nearly 7.9 million new shares will dilute the ownership stake of current investors by approximately 3.4%. On the day of the announcement, VIAVI’s stock saw a modest dip of 0.7%, suggesting the market had largely priced in or was not overly concerned by the dilution aspect.

This muted reaction is likely buoyed by the stock’s stellar performance throughout the year, having surged approximately 77% year-to-date. The market appears to be weighing the minor dilution against the significant strategic upside of a less leveraged company. Furthermore, analyst sentiment remains broadly positive. The consensus rating for VIAV hovers between “Buy” and “Moderate Buy,” with several prominent firms recently raising their price targets. Argus, for instance, set a $23 target, while Needham and Rosenblatt adjusted theirs to $20 and $19, respectively. The most recent analyst rating maintains a “Buy” with a $20.50 price target, well above the exchange price.

This suggests that investors and analysts are focused on the bigger picture: a company actively managing its financial obligations to pave the way for sustainable growth. The trade-off of short-term dilution is seen as a necessary and acceptable cost for achieving long-term financial resilience and stability.

Fueling Deleveraging After a Major Acquisition

The context for this financial maneuver is VIAVI’s recent strategic activity. In October 2025, the company borrowed the full $600 million from a senior secured Term Loan Credit Facility, which matures in 2032. These funds were instrumental in financing the acquisition of Spirent Communications plc’s high-speed ethernet and network security testing business from Keysight Technologies Inc., a move that significantly expanded VIAVI’s market footprint.

However, the acquisition came at the cost of increased leverage. S&P Global Ratings projected that VIAVI’s adjusted debt-to-EBITDA ratio would climb to approximately 6.1x following the deal, a substantial increase from 4.9x at the end of fiscal 2024. Management has been clear about its long-term goal to operate with gross leverage below 4x and net leverage well under 3x. The planned $100 million prepayment of the term loan, enabled by this debt-for-equity exchange, is the first major step on that deleveraging path.

By tackling this debt proactively, VIAVI is not only working toward its stated leverage targets but also mitigating interest rate risk associated with the term loan, which carries a variable rate tied to the Term SOFR. Reducing the principal on this loan ahead of schedule underscores management’s confidence in the company's operational performance and its ability to generate sufficient cash to support its strategic ambitions without being over-leveraged.

This transaction, therefore, is more than just a line item on a balance sheet; it is a direct and strategic response to the financial realities of a major acquisition. It showcases a management team that is not only focused on growth through acquisition but is equally committed to the fiscal discipline required to integrate those acquisitions successfully and maintain a healthy enterprise for the long haul.