SBAC » Topics » Convertible Note Hedge Transactions and Sold Warrant Transactions

This excerpt taken from the SBAC 8-K filed Apr 24, 2009.

Convertible Note Hedge Transactions and Sold Warrant Transactions

On April 20, 2009, concurrently with the pricing of the Notes, the Company entered into a Convertible Bond Hedge Transaction Confirmation with each of Citibank N.A., Barclays Bank PLC, Deutsche Bank AG London, J.P. Morgan Chase Bank, National Association and Wachovia Capital Markets, LLC (each an affiliate of an Initial Purchaser) to purchase convertible note hedges (collectively, the “Hedge Confirmations”). The initial strike price of the convertible note hedges is $30.38 per share of the Company’s Class A common stock (the same as the initial conversion price of the Notes) and is similarly subject to certain customary adjustments (other than those arising from a fundamental change, a change of control, or certain other conditions specified in the Hedge Confirmations). The convertible note hedge transactions cover an aggregate of 16,458,200 shares of the Company’s Class A common stock, as adjusted for the exercise of the over allotment option.

On April 20, 2009, in connection with the Company’s issuance of the Notes, the Company entered into an Issuer Warrant Transaction Confirmation with each of Citibank N.A., Barclays Bank PLC, Deutsche Bank AG London, J.P. Morgan Chase Bank, National Association and Wachovia Capital Markets, LLC (each an affiliate of an Initial Purchaser) to sell equity warrants (collectively, the “Warrant Confirmations”). The initial strike price of the equity warrants is $44.64 per share of the Company’s Class A common stock and is similarly subject to certain customary adjustments (other than those arising from a fundamental change, a change of control, or other certain conditions specified in the Warrant Confirmations). The equity warrants cover an aggregate of 16,458,200 shares of the Company’s Class A common stock, as adjusted for the exercise of the over allotment option.

The convertible note hedge transactions are expected to reduce the potential dilution upon conversion of the Notes in the event that the market value per share of the Company’s Class A common stock, as measured under the convertible note hedge transactions, at the time of conversion of the Notes is greater than the strike price of the convertible note hedges, which corresponds to the initial conversion price of the Notes and is similarly subject to certain customary adjustments. If, however, the volume-weighted average price per share of the Company’s Class A common stock exceeds the strike price of the warrants when it is exercised, there would be dilution from conversion of the Notes to the extent that the then volume-weighted average price per share of the Company’s Class A common stock exceeds the strike price of the warrants.

The Company has been advised that, in connection with hedging the convertible note hedge transactions and the warrant transactions, and the termination of a portion of the 2007 hedge transactions (as defined below) and 2007 warrant transactions (as defined below) as discussed under Item 1.02, the counterparties to the new hedge transactions and warrant transactions, and the 2007 hedge transactions and the 2007 warrant transactions, or their respective affiliates, expect to enter into privately negotiated derivative transactions between themselves in the Company’s Class A common stock concurrently with or shortly after the pricing of the notes. In addition, at the same time, the hedge counterparties to the new transactions also expect to purchase shares of, and/or enter into derivatives in, the Company’s Class A common stock in privately negotiated transactions with third parties and/or in open market transactions. The 2007 hedge counterparties may unwind various derivative transactions by selling the Company’s Class A common stock in open market transactions shortly following the pricing of the notes. The counterparties to the new hedging transactions have also informed the Company that they are likely to modify their hedge positions by entering into or unwinding various derivative transactions and/or by purchasing or selling the Company’s Class A common stock in secondary market transactions during the term of the notes. The effect, if any, of these transactions and activities on the market price of the Company’s Class A common stock will depend on several factors including market conditions.

 

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Certain of the Initial Purchasers and their respective affiliates perform various financial advisory, investment banking and commercial banking services from time to time for the Company and its affiliates. Affiliates of Citigroup Global Markets Inc., Barclays Capital Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., Wachovia Capital Markets, LLC, ABN Amro Incorporated and TD Securities (USA) LLC are lenders under the Company’s senior secured revolving credit facility.

The description above is qualified in its entirety by the Purchase Agreement, the Indenture, the Convertible Bond Hedge Transaction Letter Agreements and the Issuer Warrant Transaction Letter Agreements.

 

Item 1.02 Termination of a Material Definitive Agreement.
This excerpt taken from the SBAC 8-K filed May 16, 2008.

Convertible Note Hedge Transactions and Sold Warrant Transactions

On May 12, 2008, in connection with the Company’s pricing of the Notes, the Company entered into a Convertible Bond Hedge Transaction Confirmation with each of Lehman Brothers OTC Derivatives Inc., Citibank, N.A., Deutsche Bank AG, London Branch, and Wachovia Capital Markets, LLC and Wachovia Bank, National Association (each an affiliate of an Initial Purchaser) to purchase convertible note hedges. The initial strike price of the convertible note hedges is $41.46 per share of the Company’s Class A Common Stock (the same as the initial conversion price of the Notes) and is similarly subject to certain customary adjustments (other than those arising from a fundamental change, a change of control, or other certain conditions specified in the Confirmation). The convertible note hedge transactions cover an aggregate of 13,265,780 shares of the Company’s Class A common stock, as adjusted for the exercise of the over allotment option.

On May 12, 2008, in connection with the Company’s issuance of the Notes, the Company entered into an Issuer Warrant Transaction Confirmation with each of Lehman Brothers OTC Derivatives Inc., Citibank, N.A., Deutsche Bank AG, London Branch, and Wachovia Capital Markets, LLC and Wachovia Bank, National Association (each an affiliate of an Initial Purchaser) to sell equity warrants. The initial strike price of the equity warrants is $67.37 per share of the Company’s Class A common stock and is similarly subject to certain customary adjustments (other than those arising from a fundamental change, a change of control, or other certain conditions specified in the Confirmation). The equity warrants cover an aggregate of 13,265,780 shares of the Company’s Class A common stock, as adjusted for the exercise of the over allotment option.


The convertible note hedge transactions are expected to reduce the potential dilution upon conversion of the Notes in the event that the market value per share of the Company’s Class A common stock, as measured under the convertible note hedge transactions, at the time of conversion of the notes is greater than the strike price of the convertible note hedges, which corresponds to the initial conversion price of the Notes and is similarly subject to certain customary adjustments. If, however, the volume-weighted average price per share of the Company’s Class A common stock exceeds the strike price of the sold warrants when it is exercised, there would be dilution from conversion of the Notes to the extent that the then volume-weighted average price per share of the Company’s Class A common stock exceeds the strike price of the sold warrants.

The Company has been advised that, in connection with hedging the convertible note hedge transactions and the sold warrant transactions, the hedge counterparties expect to enter into various derivative transactions with respect to the Company’s Class A common stock, concurrently with or shortly after the pricing of the Notes. In addition, the hedge counterparties have also informed the Company that they are likely to modify these hedge positions by entering into or unwinding various derivative transactions and/or by purchasing or selling the Company’s Class A common stock in secondary market transactions following the pricing of the Notes. The cost of the convertible note hedge transactions that the Company entered into with the hedge counterparties will be recorded in the equity section of the Company’s balance sheet and therefore not included in interest expense.

Certain of the Initial Purchasers and their respective affiliates perform various financial advisory, investment banking and commercial banking services from time to time for the Company and its affiliates. Affiliates of Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Lehman Brothers Inc., J.P. Morgan Securities Inc., Wachovia Capital Markets, LLC, Greenwich Capital Markets, Inc. and TD Securities (USA) LLC are lenders under the Company’s senior secured revolving credit facility and will receive a portion of the net proceeds of the Notes in connection with the repayment of debt under the senior secured revolving credit facility.

The description above is qualified in its entirety by the Purchase Agreement, Convertible Bond Hedge Transaction Agreements and Issuer Warrant Transaction Letter Agreements.

 

Item 3.02 Unregistered Sale of Equity Securities.

The information set forth under Item 1.01 is incorporated by reference herein.

The Company offered and sold the Notes and sold warrants to the Initial Purchasers pursuant to an exemption from registration under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). The Initial Purchasers have agreed to re-sell the Notes to “qualified institutional buyers” in accordance with Rule 144A under the Securities Act.

The Notes will be convertible, at the option of the noteholders, under the following circumstances:

 

   

during any calendar quarter commencing at any time after June 30, 2008 and only during such calendar quarter, if the last reported sale price of the Company’s Class A common stock for at least 20 trading days in the 30 consecutive trading day period ending on the last trading day of the preceding calendar quarter is more than 130% of the applicable conversion price per share of Class A common stock on the last day of such preceding calendar quarter;


   

during the five business day period after any 10 consecutive trading day period (“the measurement period”) in which the trading price per $1,000 principal amount of notes for each day in the measurement period was less than 95% of the product of the last reported sale price of the Company’s Class A common stock and the applicable conversion rate;

 

   

if specified distributions to holders of the Company’s Class A common stock are made or specified corporate transactions occur; or

 

   

at any time on or after February 19, 2013.

The notes will be convertible based on an initial conversion rate of 24.1196 shares of the Company’s Class A common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $41.46 per share). The conversion rate, and thus the conversion price, may be adjusted under certain circumstances. The Company will have the right to deliver shares of its Class A common stock, cash or a combination of cash and shares of its Class A common stock upon conversion. The Company from time to time will make an election with respect to the method it chooses to satisfy its obligation upon conversion, which election shall be effective until it provides notice of an election of a different method of settlement. The Company initially elects to settle its conversion obligation in shares of its Class A common stock.

 

Item 8.01 Other Events.

On May 12, 2008, the Company issued a press release announcing its intention to offer $500 million principal amount of Notes and its expectation to grant to the Initial Purchasers an option to purchase up to $50 million principal amount of additional Notes to cover over allotments. A copy of the press release is filed herewith as Exhibit 99.1.

On May 13, 2008, the Company issued a press release announcing the pricing of its previously announced $500 million principal amount of Notes and the granting to the Initial Purchasers of an over allotment option to purchase an additional $50 million principal amount of Notes. A copy of the press release is filed herewith as Exhibit 99.2.

On May 14, 2008, the Company issued a press release announcing that the Initial Purchasers of $500 million principal amount of Notes elected to exercise their over allotment option to purchase an additional $50 million principal amount of such Notes. A copy of the press release is filed herewith as Exhibit 99.3.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.

  

Description

10.69    Purchase Agreement, dated May 12, 2008, among SBA Communications Corporation and Deutsche Bank Securities Inc., Citigroup Global Markets Inc. and Lehman Brothers Inc., as representatives of the several initial purchasers listed on Schedule I of the Purchase Agreement.
99.1      Press release issued by SBA Communications Corporation on May 12, 2008.
99.2      Press release issued by SBA Communications Corporation on May 13, 2008.
99.3      Press release issued by SBA Communications Corporation on May 14, 2008.


This excerpt taken from the SBAC 8-K filed Mar 26, 2007.

Convertible Note Hedge Transactions and Sold Warrant Transactions

On March 20, 2007, in connection with the Company’s pricing of the Notes, the Company entered into a Convertible Bond Hedge Transaction Confirmation with each of Citibank, N.A. and Deutsche Bank AG, London Branch (each an affiliate of an Initial Purchaser), dated March 20, 2007, to purchase convertible note hedges. The initial strike price of the convertible note hedges is $33.56 per share of the Company’s Class A Common Stock (the same as the initial conversion price of the Notes) and is similarly subject to certain customary adjustments (other than those arising from a fundamental change, a change of control, or other certain conditions specified in the Confirmation). The convertible note hedge transactions cover an aggregate of 10,429,720 shares of the Company’s Class A common stock, as adjusted for the exercise of the over allotment option.

On March 20, 2007, in connection with the Company’s issuance of the Notes, the Company entered into an Issuer Warrant Transaction Confirmation with each of Citibank, N.A. and Deutsche Bank AG, London Branch (each an affiliate of an Initial Purchaser), dated March 20, 2007 to sell equity warrants. The initial strike price of the equity warrants is $55.00 per share of the Company’s Class A common stock and is similarly subject to certain customary adjustments (other than those arising from a fundamental change, a change of control, or other certain conditions specified in the Confirmation). The equity warrants cover an aggregate of 10,429,720 shares of the Company’s Class A common stock, as adjusted for the exercise of the over allotment option.

The convertible note hedge transactions are expected to reduce the potential dilution upon conversion of the Notes in the event that the market value per share of the Company’s Class A common stock, as measured under the convertible note hedge transactions, at the time of conversion of the notes is greater than the strike price of the convertible note hedges, which corresponds to the initial conversion price of the Notes and is similarly subject to certain customary adjustments. If, however, the volume-weighted average price per share of the Company’s Class A common stock exceeds the strike price of the sold warrants when it is exercised, there would be dilution from conversion of the Notes to the extent that the then volume-weighted average price per share of the Company’s Class A common stock exceeds the strike price of the sold warrants.

The Company has been advised that, in connection with hedging the convertible note hedge transactions and the sold warrant transactions, the affiliates of the Initial Purchasers expect to purchase shares of the Company’s Class A common stock or enter into various derivative transactions with respect to the Company’s Class A common stock, concurrently with or shortly after the pricing of the Notes. In addition, the affiliates of the Initial Purchasers that will be parties to these transactions have also informed the Company that they may enter into, or unwind, various derivative transactions and/or by purchasing or selling the Company’s Class A common stock in secondary market transactions following the pricing of the Notes. Also, the Initial Purchasers or their respective affiliates, may unwind various derivatives and/or purchase or sell the Company’s Class A common stock in secondary market transactions prior to the maturity of the Notes (including during any settlement period in respect of any conversion of the Notes), which could


adversely impact the price of the Company’s Class A common stock and of the Notes or the settlement amount payable upon conversion of the Notes. The cost of the convertible note hedge transactions that the Company expects to enter into with the affiliates of the Initial Purchasers will be recorded in the equity section of the Company’s balance sheet and therefore not included in interest expense.

The description above is qualified in its entirety by the Purchase Agreement, Indenture, Registration Rights Agreement, Convertible Bond Hedge Transaction Agreements between the Company and Citibank, N.A. and the Company and Deutsche Bank AG, London Branch and the Issuer Warrant Transaction Letter Agreements between the Company and Citibank, N.A. and the Company and Deutsche Bank AG, London Branch.

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