Virgin Galactic Holdings, Inc. (NYSE: SPCE) (“Virgin Galactic”
or “the Company”) today announced the pricing of its offering of
$425 million aggregate principal amount of 2.50% 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”). The issuance and sale of the notes are scheduled
to settle on January 19, 2022, subject to customary closing
conditions. Virgin Galactic also granted 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 and will accrue interest at a rate of 2.50% per annum,
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 initial conversion rate
is 78.1968 shares of common stock per $1,000 principal amount of
notes, which represents an initial conversion price of
approximately $12.79 per share of common stock. The initial
conversion price represents a premium of approximately 27.5% over
the last reported sale price of $10.03 per share of Virgin
Galactic’s common stock on January 13, 2022. The conversion rate
and conversion price will be subject to adjustment upon the
occurrence of certain events.
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.
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.
Virgin Galactic estimates that the net proceeds from the
offering will be approximately $413.7 million (or approximately
$486.8 million if the initial purchasers fully exercise their
option to purchase additional notes), after deducting the initial
purchasers’ discounts and commissions and estimated offering
expenses. The Company intends to use approximately $52.3 million of
the net proceeds to fund the cost of entering into the capped call
transactions described below. Virgin Galactic intends to use the
remainder of 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. 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
entered into privately negotiated capped call transactions with
certain financial institutions, which included one or more of the
initial purchasers or their affiliates (the “option
counterparties”). The capped call transactions cover, subject to
customary anti-dilution adjustments, the number of shares of Virgin
Galactic’s common stock underlying 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 cap price of the capped call transactions will initially be
$20.06 per share, which represents a premium of 100% over the last
reported sale price of Virgin Galactic’s common stock of $10.03 per
share on January 13, 2022, and is subject to certain adjustments
under the terms of the capped call transactions.
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 completion of the offering, the
expected amount and intended use of the net proceeds 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, the satisfaction of the closing conditions
related to the offering 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 offering
described in this press release and, if the offering is
consummated, cannot provide any assurances regarding 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/20220113005991/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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