Virgin Galactic Holdings, Inc. (NYSE: SPCE) (“Virgin Galactic”
or “the Company”) today announced its intention to offer, subject
to market and other conditions, $425 million aggregate principal
amount of convertible senior notes due 2027 (the “notes”) in a
private offering to persons reasonably believed to be qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the “Securities Act”). Virgin Galactic also
expects to grant the initial purchasers of the notes an option to
purchase, for settlement within a period of 13 days from, and
including, the date when the notes are first issued, up to an
additional $75 million principal amount of notes.
The notes will be senior, unsecured obligations of Virgin
Galactic, will accrue interest payable semi-annually in arrears on
February 1 and August 1 of each year, beginning on August 1, 2022.
The notes will mature on February 1, 2027, unless earlier
repurchased, redeemed or converted. Prior to November 1, 2026,
noteholders will have the right to convert their notes only upon
the occurrence of certain events. On and after November 1, 2026,
noteholders will have the right to convert their notes at any time
at their election until the close of business on the second
scheduled trading day immediately before the maturity date. Virgin
Galactic will settle conversions by paying or delivering, as
applicable, cash, shares of its common stock or a combination of
cash and shares of its common stock, par value $0.0001 per share
(the “common stock”), at its election, based on the conversion
rate. The notes will be redeemable, in whole or in part (subject to
certain limitations), for cash at Virgin Galactic’s option at any
time, and from time to time, on or after February 6, 2025 and on or
before the 20th scheduled trading day immediately before the
maturity date, but only if the last reported sale price per share
of Virgin Galactic’s common stock exceeds 130% of the conversion
price for a specified period of time and certain liquidity
conditions have been satisfied. The redemption price will be equal
to the principal amount of the notes to be redeemed, plus accrued
and unpaid interest, if any, to, but excluding, the redemption
date. The interest rate, initial conversion rate and other terms of
the notes will be determined at the pricing of the offering.
If a “fundamental change” (as will be defined in the indenture
for the notes) occurs, then, subject to a limited exception,
noteholders may require Virgin Galactic to repurchase their notes
for cash. The repurchase price will be equal to the principal
amount of the notes to be repurchased, plus accrued and unpaid
interest, if any, to, but excluding, the applicable repurchase
date.
The Company intends to use the net proceeds from the offering to
fund working capital, general and administrative matters and
capital expenditures to accelerate the development of its
spacecraft fleet in order to facilitate high-volume commercial
service. Virgin Galactic also intends to use a portion of the net
proceeds from the offering to fund the cost of entering into the
capped call transactions described below. If the initial purchasers
exercise their option to purchase additional notes, then Virgin
Galactic intends to use a portion of the additional net proceeds to
fund the cost of entering into additional capped call transactions
as described below.
In connection with the pricing of the notes, Virgin Galactic
expects to enter into privately negotiated capped call transactions
with certain financial institutions, which may include one or more
of the initial purchasers or their affiliates (the “option
counterparties”). The capped call transactions are expected to
cover, subject to customary anti-dilution adjustments, the number
of shares of Virgin Galactic’s common stock that will initially
underlie the notes. If the initial purchasers exercise their option
to purchase additional notes, Virgin Galactic expects to enter into
additional capped call transactions with the option
counterparties.
The capped call transactions are expected generally to reduce
the potential dilution to Virgin Galactic’s common stock upon any
conversion of the notes and/or offset any potential cash payments
Virgin Galactic is required to make in excess of the principal
amount of converted notes, as the case may be, upon conversion of
the notes, up to a cap price. If, however, the market price per
share of Virgin Galactic’s common stock, as measured under the
terms of the capped call transactions, exceeds the cap price of the
capped call transactions, there would nevertheless be dilution
and/or there would not be an offset of such potential cash
payments, in each case, to the extent that such market price
exceeds the cap price of the capped call transactions.
Virgin Galactic has been advised that, in connection with
establishing their initial hedges of the capped call transactions,
the option counterparties or their respective affiliates expect to
enter into various derivative transactions with respect to Virgin
Galactic’s common stock and/or purchase shares of Virgin Galactic’s
common stock concurrently with or shortly after the pricing of the
notes. This activity could increase (or reduce the size of any
decrease in) the market price of Virgin Galactic’s common stock or
the notes at that time.
In addition, the option counterparties or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to Virgin Galactic’s
common stock and/or purchasing or selling Virgin Galactic’s common
stock or other securities in secondary market transactions
following the pricing of the notes and from time to time prior to
the maturity of the notes (and are likely to do so following any
conversion of the notes, any repurchase of the notes by Virgin
Galactic on any fundamental change repurchase date, any redemption
date or any other date on which the notes are retired by Virgin
Galactic, in each case, if Virgin Galactic exercises the relevant
election to terminate the corresponding portion of the capped call
transactions). This activity could also cause or avoid an increase
or decrease in the market price of Virgin Galactic’s common stock
or the notes, which could affect the ability to convert the notes,
and, to the extent the activity occurs during any observation
period related to a conversion of notes, it could affect the number
of shares of common stock, if any, and value of the consideration
that noteholders will receive upon conversion of the notes.
The offer and sale of the notes and any shares of common stock
issuable upon conversion of the notes have not been, and will not
be, registered under the Securities Act or any other securities
laws, and the notes and any such shares cannot be offered or sold
except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and
any other applicable securities laws. This press release does not
constitute an offer to sell, or the solicitation of an offer to
buy, the notes or any shares of common stock issuable upon
conversion of the notes, nor will there be any sale of the notes or
any such shares, in any state or other jurisdiction in which such
offer, sale or solicitation would be unlawful.
About Virgin Galactic
Virgin Galactic is an aerospace and space travel company,
pioneering human spaceflight for private individuals and
researchers with its advanced air and space vehicles. It is
developing a spaceflight system designed to connect the world to
the wonder and awe created by space travel and to offer customers a
transformative experience.
Forward-Looking Statements
This press release includes forward-looking statements,
including statements regarding the anticipated terms of the notes
being offered, the completion, timing and size of the proposed
offering, and the intended use of the proceeds and the anticipated
terms of, and the effects of entering into, the capped call
transactions described above. Forward-looking statements represent
Virgin Galactic’s current expectations regarding future events and
are subject to known and unknown risks and uncertainties that could
cause actual results to differ materially from those implied by the
forward-looking statements. Among those risks and uncertainties are
market conditions, including market interest rates, the trading
price and volatility of Virgin Galactic’s common stock and risks
relating to Virgin Galactic’s business, including those described
in periodic reports that Virgin Galactic files from time to time
with the Securities and Exchange Commission. Virgin Galactic may
not consummate the proposed offering described in this press
release and, if the proposed offering is consummated, cannot
provide any assurances regarding the final terms of the offering or
the notes or its ability to effectively apply the net proceeds as
described above. The forward-looking statements included in this
press release speak only as of the date of this press release, and
Virgin Galactic does not undertake to update the statements
included in this press release for subsequent developments, except
as may be required by law.
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version on businesswire.com: https://www.businesswire.com/news/home/20220112006070/en/
For Investor Relations inquiries: VG-IR@virgingalactic.com
For media inquiries: Aleanna Crane – Vice President
Communications virgingalacticpress@virgingalactic.com +1 575 800
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