Convertible Bond Hedge Unwind Transactions
As previously disclosed, the Company and the entities constituting the Warrant Counterparties (the “Bond Hedge Counterparties”) also entered into agreements (the “Bond Hedge Termination Agreements”) as of April 14, 2022, providing for the termination of all of the convertible note hedges previously entered into in connection with the issuance of the Convertible Notes.
Convertible Note Repurchases
As disclosed on April 14, 2022, the Company entered into individual privately negotiated transactions (the “Note Repurchase Agreements”) to repurchase a portion of its outstanding Convertible Notes. The Company completed the transactions under the Note Repurchase Agreements on May 3, 2022. An aggregate principal amount of approximately $101 million of Convertible Notes will remain outstanding following the completion of the Note Repurchases, consisting of approximately $20 million in aggregate principal amount of 2023 Notes and $81 million in aggregate principal amount of 2024 Notes.
Aggregate Net Cash Payment by the Company
As a result of the Bond Hedge Termination Agreements, all convertible note hedges entered into in connection with the issuance of the Convertible Notes have been terminated including convertible note hedges with respect to any Convertible Notes that remain outstanding.
As a result of the Remaining Warrant Termination Agreements, all Note Warrants entered into in connection with the issuance of the Convertible Notes have been terminated including Note Warrants with respect to any Convertible Notes that remain outstanding.
The foregoing transactions have all been completed and closing payments have been made. In aggregate, the Company has expended a net total amount of approximately $480 million in cash (inclusive of expenses) to achieve (i) the repurchase of $180 million in aggregate principal balance of Convertible Notes, (ii) the termination of all of the Note Warrants including both the Initial Repurchased Warrants as previously disclosed and the Remaining Repurchased Warrants, and (iii) the termination of all of the convertible note hedges in connection with the Convertible Notes (including terminating all Note Warrants and convertible note hedges in connection with the approximately $101 million in aggregate principal amount of Convertible Notes that will remain outstanding).
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements concerning the terms and conditions of the 2022 Incremental Amendment and the Amended Credit Agreement, the potential cost of capital made available to RH subsidiaries under such Amended Credit Agreement, the interest rate associated with the 2022 Incremental Term Debt, the length of time the 2022 Incremental Term Debt may remain outstanding, the potential use of proceeds of the 2022 Incremental Term Debt, the covenants and restrictions contained in the Amended Credit Agreement and the ability of the loan parties to maintain compliance with the terms and conditions of the Amended Credit Agreement, from time to time. You can identify forward looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “if,” “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future events. We cannot assure you that future developments affecting us will be those that we have anticipated. Important risks and uncertainties that could cause actual results to differ materially from our expectations include, among others, risks and uncertainties relating to the aggregate overall level of indebtedness that we incur, the terms and conditions of any debt financing including the 2022 Incremental Amendment, risks and uncertainties concerning the use of proceeds with respect to any debt financing including the 2022 Incremental Amendment, risks and uncertainties related to our decisions regarding the allocation and uses of capital, risks and uncertainties related to fluctuations in interest rates, risks and uncertainties concerning whether the financial performance of the Company meets expectations, risks and uncertainties concerning any other transactions relating to the remaining balance of the Convertible Notes, and those other risks and uncertainties disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in RH’s Annual Report on Form 10-K most recently filed with the Securities and Exchange Commission, and similar disclosures in subsequent reports filed with the SEC, which are available on our investor relations website at ir.rh.com and on the SEC website at www.sec.gov. You should not place undue reliance on these forward-looking statements. Any forward-looking statement made by us on this Current Report on Form 8-K speaks only as of the date on which we make it. RH expressly disclaims any obligation or undertaking to release publicly any updates or revisions to such statements to reflect any change in its expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based.