Virgin Galactic Holdings, Inc. Announces Proposed Convertible Senior Notes Offering

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by Daniel Webster, dWeb.News Publisher

LAS CRUCES, N.M.–(BUSINESS WIRE)–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, which will be senior, unsecure obligations of Virgin Galactic and will accrue interest semi-annually, in arrears, on February 1st and August 1st of each year. They will begin on August 1st 2022.. The notes will expire on February 1, 2027,, unless repurchased or redeemed earlier. Prior to November 1, 2026, noteholders have the right to convert their notes upon certain events. 2026, noteholders have the right to convert any of their notes at their choice until the close on the second trading day before the maturity date. Virgin Galactic will settle any conversions by paying out cash or delivering shares of its common stocks, or a combination thereof, 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 principal amount of the notes, accrued and unpaid interests, and any other conditions, will be the redemption price. At the time of the offering, the interest rate, initial convert rate and other terms will be established.

Noteholders can request Virgin Galactic to repurchase notes for cash if there is a “fundamental” change (as defined in the indenture to the notes). The principal amount of the notes to repurchase, accrued and unpaid interests, if any, will all be included in the repurchase price. However, this will not include the applicable repurchase date.

The Company plans to use the net proceeds of the offering to fund working capital and general and administrative matters, as well as capital expenditures in order to accelerate its development of spacecraft fleets for high-volume commercial service. Virgin Galactic will also use some of the net proceeds to finance the costs of participating in the capped-call transactions. Virgin Galactic will use some of the net proceeds from the offering to pay for additional capped-call transactions.

Virgin Galactic plans to enter into private-negotiated capped call transactions, including with certain financial institutions. These may include the initial purchasers, their affiliates, or the “option counterparties”. Subject to any customary anti-dilution adjustments the capped call transactions will cover the initial number of shares of Virgin Galactic common stock under which the notes are to be based. Virgin Galactic anticipates that if the initial purchasers exercise their right to purchase additional notes, they will enter into additional capped-call transactions with the option counterparties.

Capped call transactions are expected to reduce Virgin Galactic’s stock price after any notes conversion and/or offset any cash payments Virgin Galactic may have to make beyond the principal amount of the converted notes. However, if the market price per share for Virgin Galactic’s common stocks exceeds that of the cap prices of the caps call transactions, there will be dilution or an offset of any potential cash payments. Virgin Galactic was advised that in order to establish their initial hedges for the capped-call transactions, either the option counterparties, or their respective affiliates, expect to enter into derivative transactions with Virgin Galactic’s common stock and/or buy shares of Virgin Galactic’s common stock simultaneously with or shortly following the pricing of the notes. This activity could cause a rise in the price of Virgin Galactic common stock or decreases in the value of the notes.

Option counterparties and their affiliates could also modify their hedge positions by entering or unwinding derivatives with Virgin Galactic. These transactions may be made following the pricing of Virgin Galactic’s stock, and/or the purchase or sale of Virgin Galactic stock or other securities in secondary markets transactions. This is likely to happen following any conversion of notes, any repurchase by Virgin Galactic on any fundamental changes repurchase date or any redemption date. If Virgin Galactic exercise the appropriate election to terminate the corresponding capped call transactions, The activity could cause or prevent an increase or decrease of the price of Virgin Galactic’s common stock or notes. It could also affect the ability of noteholders to convert the notes. The sale and offer of the notes, as well as any shares of common stock, is not registered under the Securities Act. Noteholders will not receive any consideration for the conversion of their notes. They cannot also be sold or offered to sell the notes or such shares unless they are exempted from the Securities Act’s registration requirements. This press release is not intended to be an offer to sell or solicitation of an offer for the sale of the shares or notes. The notes and any shares of common stock are not convertible into cash.

About Virgin Galactic

Virgin Galactic, an aerospace and travel company, is pioneering human spaceflight. It is currently developing a spaceflight system to bring the world closer to the wonders and awe of space travel, and to provide customers with 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. These forward-looking statements reflect Virgin Galactic’s current expectations about future events. Actual results could differ materially from the ones implied by these forward-looking statements. Market conditions, including volatility and trading prices of Virgin Galactic’s common stock, and risks related to Virgin Galactic’s business are just a few of the uncertainties. These risks and uncertainties include market conditions. Virgin Galactic might not consummate the proposal offering as described in this press release. If the offering is consummated, Virgin Galactic cannot give any assurances about the final terms or the notes, or its ability to apply the net proceeds, as described above. These forward-looking statements are made as of the date this press release was issued. Virgin Galactic cannot guarantee that any statements in this pressrelease will be updated for future developments.

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