Air Transport Services Group, Inc. (NASDAQ: ATSG) today
announced the pricing of its offering of $350,000,000 aggregate
principal amount of 3.875% convertible senior notes due 2029 (the
“notes”) in a private offering to 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 August 14, 2023, subject to customary
closing conditions. ATSG also granted the initial purchasers of the
notes a 30-day option to purchase up to an additional $50,000,000
principal amount of notes.
The notes will be senior, unsecured obligations of ATSG and will
accrue interest at a rate of 3.875% per annum, payable
semi-annually in arrears on February 15 and August 15 of each year,
beginning on February 15, 2024. The notes will mature on August 15,
2029, unless earlier repurchased, redeemed or converted. Before
February 15, 2029, noteholders will have the right to convert their
notes only upon the occurrence of certain events. From and after
February 15, 2029, noteholders may 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. ATSG
will settle conversions in cash and, if applicable, shares of its
common stock. The initial conversion rate is 31.2864 shares of
common stock per $1,000 principal amount of notes, which represents
an initial conversion price of approximately $31.96 per share of
common stock. The initial conversion price represents a premium of
approximately 42.5% over the last reported sale price of $22.43 per
share of ATSG’s common stock on August 9, 2023. 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 ATSG’s option at any time, and
from time to time, on or after August 15, 2026 and on or before the
50th scheduled trading day immediately before the maturity date,
but only if the last reported sale price per share of ATSG’s common
stock exceeds 130% of the conversion price for a specified period
of time. 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 defined in the indenture for the
notes) occurs, then noteholders may require ATSG 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.
ATSG estimates that the net proceeds from the offering will be
approximately $340.1 million (or approximately $388.8 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. ATSG
expects to use approximately $118.5 million of the net proceeds to
repurchase approximately 5.4 million shares of its common stock
concurrently with the offering in privately negotiated transactions
effected through one of the initial purchasers of the notes or its
affiliate, as ATSG’s agent, and to repurchase shares of its common
stock from Amazon.com, Inc. under an existing agreement. ATSG
expects to use approximately $203.2 million of the net proceeds to
repurchase approximately $204.5 million aggregate principal amount
of its outstanding 1.125% Convertible Senior Notes due 2024 (the
“2024 Notes”) concurrently with the offering in privately
negotiated transactions effected through one of the initial
purchasers of the notes or its affiliate, as ATSG’s agent. ATSG
intends to use the remainder of the net proceeds from the offering
to repay a portion of the outstanding borrowings under its
revolving credit facility and for general corporate purposes.
Holders of the 2024 Notes that are repurchased in the concurrent
repurchases described above may purchase shares of ATSG’s common
stock in the open market to unwind any hedge positions they may
have with respect to the 2024 Notes. These activities may affect
the trading price of ATSG common stock and, if conducted
concurrently with this offering, may result in a higher initial
conversion price for the notes ATSG is offering. The concurrent
repurchases of shares of ATSG’s common stock described above may
result in the common stock trading at prices that are higher than
would be the case in the absence of these repurchases, which may
result in a higher initial conversion price for the notes. The
repurchase of common stock in connection with the offering will not
reduce availability under ATSG’s stock repurchase program
authorized on November 29, 2022.
In connection with issuing the 2024 Notes, ATSG entered into
convertible note hedge transactions (the “existing convertible note
hedge transactions”) and warrant transactions (the “existing
warrant transactions,” and, together with the existing convertible
note hedge transactions, the “existing call spread transactions”)
with certain financial institutions (the “existing option
counterparties”). In connection with ATSG’s intended repurchase of
the 2024 Notes, ATSG expects to enter into agreements with the
existing option counterparties to terminate a portion of such
existing call spread transactions, in each case, in a notional
amount corresponding to the amount of such 2024 Notes repurchased.
In connection with any termination of any of the existing call
spread transactions and the related unwinding of the existing hedge
position of the existing option counterparties with respect to such
transactions, such existing option counterparties and/or their
respective affiliates may sell shares of ATSG’s common stock in the
open market or in secondary market transactions, and/or enter into
or unwind various derivative transactions with respect to ATSG’s
common stock. This hedge unwind activity could decrease (or reduce
the size of any increase in) the market price of ATSG common stock
at that time and it could decrease (or reduce the size of any
increase in) the market value of the notes. In connection with the
unwind of the existing call spread transactions, ATSG may make or
receive payments in amounts that depend on the market value of ATSG
common stock at the pricing 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 ATSG
ATSG is a leading provider of aircraft leasing and cargo and
passenger air transportation and related services to domestic and
foreign air carriers and other companies that outsource their cargo
and passenger airlift requirements. ATSG, through its leasing and
airline subsidiaries, is the world's largest owner and operator of
converted Boeing 767 freighter aircraft. Through its principal
subsidiaries, including three airlines with separate and distinct
U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft
leasing, air cargo lift, passenger ACMI and charter services,
aircraft maintenance services and airport ground services. ATSG's
subsidiaries include ABX Air, Inc.; Airborne Global Solutions,
Inc.; Airborne Maintenance and Engineering Services, Inc.,
including its subsidiary, Pemco World Air Services, Inc.; Air
Transport International, Inc.; Cargo Aircraft Management, Inc.; and
Omni Air International, LLC.
Forward-Looking Statements
This press release includes forward-looking statements,
including statements regarding the completion of the offering and
the expected amount and intended use of the net proceeds.
Forward-looking statements represent ATSG’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 ATSG’s business, including those described in
periodic reports that ATSG files from time to time with the SEC.
ATSG 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 ATSG does not undertake to update the statements
included in this press release for subsequent developments, except
as may be required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230810952944/en/
Quint O. Turner, Chief Financial Officer Air Transport Services
Group, Inc. 937-366-2303
Air Transport Services (NASDAQ:ATSG)
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