CAPITALSOURCE 8-K 2007
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 2007
(Exact name of registrant as specified in its charter)
4445 Willard Avenue, 12th Floor
Chevy Chase, MD 20815
(Address of principal executive offices, zip code)
Registrants telephone number, including area code (800) 370-9431
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Item 1.01 Entry into a Material Definitive Agreement.
On July 30, 2007, CapitalSource Inc. (the Company) and its wholly owned subsidiary, CapitalSource Finance LLC (Finance), entered into an indenture for subordinated debt securities dated as of July 30, 2007 (the Base Indenture) and a first supplemental indenture thereto dated as of July 30, 2007, supplementing the Base Indenture (the Supplemental Indenture and, together with the Base Indenture, the Indenture), with Wells Fargo Bank, N.A., as trustee (the Trustee), pursuant to which the Company issued $250 million in aggregate principal amount of its 7.250% Senior Subordinated Convertible Notes due 2037, guaranteed on a senior subordinated basis by Finance (the notes). As previously reported, the Company and Finance sold the notes in an underwritten public offering pursuant to a Registration Statement on Form S-3 and related prospectus and prospectus supplement, filed with the Securities and Exchange Commission. The closing of the sale took place on July 30, 2007.
The notes have an initial principal amount of $1,000 per note and bear interest at a rate of 7.250%. We will pay interest on the notes on January 15 and July 15 of each year, beginning on January 15, 2008. On July 15, 2037, the maturity date of the notes, holders will receive the principal amount of $1,000 per note. The notes were issued with original issue discount for U.S. federal income tax purposes.
We may, without notice to or consent of the holders, reopen the notes and issue additional notes under the Indenture with the same terms and with the same CUSIP numbers as the notes offered hereby in an unlimited aggregate principal amount, provided that no such additional notes may be issued unless fungible with the notes sold on July 30, 2007 for U.S. federal income tax purposes. The notes sold on July 30, 2007 and any such additional notes would be treated as a single class for all purposes under the Indenture and would vote together as one class on all matters with respect to the notes. We may also from time to time repurchase the notes in open market purchases or negotiated transactions without prior notice to holders.
The notes may be converted:
The conversion rate will initially be 36.9079 shares of our common stock per $1,000 principal amount of notes, which represents an initial conversion price per share of $27.09. The conversion rate will be subject to adjustment upon the occurrence of specified events, including, among other things, our payment of any cash dividend or distribution during any of our quarterly fiscal periods to all or substantially all holders of our common stock, other than regular quarterly dividends that do not exceed $0.60 per share. Upon conversion, holders will receive, in respect of each $1,000 principal amount of notes surrendered for conversion, cash and shares of our common stock, if any, equal to the sum of the daily settlement amounts for each day of a 16 trading day observation period. The daily settlement amount for each of the 16 trading days of the related observation period will consist of: (1) an amount in cash equal to the lesser of $62.50 and the daily conversion value relating to such day, and (2) to the extent the daily conversion value exceeds $62.50, a number of shares equal to (A) the difference between the daily conversion value and $62.50 divided by (B) the common stock price for that day. We will have the option to deliver cash in lieu of all or any portion of the shares, if any, deliverable upon conversion. If holders elect to convert their notes in connection with specified changes in control that occur on or prior to July 15, 2012, we will increase the conversion rate by a make-whole premium specified in the Supplemental Indenture.
We may not redeem the notes before July 20, 2012. On or after that date, we may redeem the notes in whole or in part for cash at a price equal to 100% of the principal amount of the notes to be redeemed. Holders may require us to repurchase all or any portion of their notes on July 15, 2012, 2017, 2022, 2027 and 2032. Holders may also require us to repurchase all or a portion of their notes, subject to specified exceptions, upon the occurrence of a fundamental change at 100% of the principal amount of the notes.
The Indenture does not require us to comply with any financial covenants or prohibit us or our subsidiaries from time to time, without notice to or consent of the holders, from creating and issuing additional debt securities ranking senior to, or equally and ratably with, the notes in all respects.
The notes will be our unsecured and senior subordinated obligations. The notes will rank senior to our guarantees of the junior subordinated debt incurred by Finance in our outstanding trust preferred securities financings; equally with our senior subordinated convertible debentures due 2034; and junior to all of our other existing and future indebtedness, unless the existing or future indebtedness provides that it ranks junior or equal in right of payment to the notes.
Finance will fully and unconditionally guarantee the due and punctual payment of our obligations under the notes on a senior subordinated basis. The guarantee will rank senior to Finances junior subordinated debt incurred in our outstanding trust preferred securities financings; equally with Finances guarantees of our senior subordinated convertible debentures due 2034; and junior to all of Finances other existing and future indebtedness or guarantees of indebtedness, unless the existing or future indebtedness provides that it ranks junior or equal in right of payment to the guarantee. The notes and guarantee will rank structurally junior to all existing and future liabilities incurred or guaranteed by our subsidiaries other than Finance.
We will use the net proceeds from the sale of the notes (approximately $243.8 million, after deducting estimated expenses) to repay indebtedness under our $1.05 billion unsecured revolving credit facility.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.