UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| ITEM 1.01. | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. |
On April 27, 2020, American Eagle Outfitters, Inc. (the “Company”) closed its previously announced issuance and sale of $400 million aggregate principal amount of the Company’s 3.75% Convertible Senior Notes due 2025 (the “Notes”). The Company has granted the initial purchasers of the Notes (the “Initial Purchasers”) an option to purchase, for settlement within a period of 13 days from, and including, the date the Company first issued the Notes, up to an additional $60 million aggregate principal amount of the Notes. The net proceeds to the Company from the issuance and sale of the Notes were approximately $389.4 million, after deducting the Initial Purchasers’ discounts and commissions and the Company’s estimated offering expenses.
The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of April 27, 2020, between the Company and U.S. Bank National Association, as trustee (the “Trustee”). The Notes will be the Company’s unsecured, unsubordinated obligations and will be (i) equal in right of payment with the Company’s existing and future unsecured, unsubordinated indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent that the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.
The Notes will accrue interest at a rate of 3.75% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2020. The Notes will mature on April 15, 2025 (the “Maturity Date”), unless earlier repurchased, redeemed or converted. Prior to the close of business on the business day immediately preceding January 15, 2025 (the “Free Convertibility Date”), noteholders may convert their Notes at their option only in the following circumstances:
| (i) | during any calendar quarter commencing after the calendar quarter ending on September 30, 2020, if the last reported sale price per share of the Company’s common stock for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter, exceeds 130% of the conversion price then in effect on each applicable trading day, as determined by the Company in good faith; |
| (ii) | during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “Measurement Period”) if the trading price per $1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day, subject to compliance with certain procedures and conditions, as set forth in the Indenture; |
| (iii) | upon the occurrence of certain corporate events or distributions on the Company’s common stock, as set forth in the Indenture; and |
| (iv) | if the Company calls such Notes for redemption (but solely, subject to certain exceptions, with respect to such Notes called for redemption). |
Noteholders may convert their Notes at their option at any time from, and including, the Free Convertibility Date until the close of business on the second scheduled trading day immediately before the Maturity Date, regardless of the foregoing conditions. The Company will settle conversions by paying or delivering, as applicable, at the Company’s election, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. If the Company elects to deliver cash or a combination of cash and shares of the Company’s common stock, then the consideration due upon conversion will be determined over an observation period consisting of 40 “VWAP Trading Days” (as defined in the Indenture). The initial conversion rate is 114.2988 shares of the Company’s common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $8.75 per share of the Company’s common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.
The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after April 17, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.
If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders will have the right to require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest thereon to, but excluding, the “Fundamental Change Repurchase Date” (as defined in the Indenture). The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.
The Indenture does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company or any of its subsidiaries. The Indenture contains customary terms and covenants and events of default. If any event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, then, the Trustee, by written notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by written notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. If an event of default involving certain events of bankruptcy, insolvency or reorganization occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consist exclusively of the right of the noteholders to receive special interest on the Notes for up to 365 calendar days during which such event of default has occurred and is continuing, at a specified rate for the first 180 days of 0.25% per annum, and thereafter at a rate of 0.50% per annum, on the principal amount of the Notes.
The above description of the Indenture and the Notes is a summary and is not complete. A copy of the Indenture and the form of the certificate representing the Notes are filed as Exhibits 4.1 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. The above summary is qualified in its entirety by reference to the terms of the Indenture and the Notes filed as exhibits hereto.
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| ITEM 2.03. | CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OFF-BALANCE SHEET ARRANGEMENT. |
The disclosure set forth in Item 1.01 above is incorporated by reference into this Item 2.03.
| ITEM 3.02. | UNREGISTERED SALES OF EQUITY SECURITIES. |
The disclosure set forth in Item 1.01 above is incorporated by reference into this Item 3.02. The Notes were issued to the Initial Purchasers in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) in transactions not involving any public offering. The Initial Purchasers are initially offering the Notes only to persons whom the Initial Purchasers reasonably believe are “qualified institutional buyers,” as defined in, and in accordance with, Rule 144A under the Securities Act. The Company relied on these exemptions from registration based in part on representations made by the Initial Purchasers. Any shares of the Company’s common stock that may be issued upon conversion of the Notes will be issued in reliance upon Section 3(a)(9) of the Securities Act as involving an exchange by the Company exclusively with its security holders. The Notes and the Company’s common stock issuable upon conversion of the Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Assuming the Initial Purchasers exercise their option to purchase additional Notes, a maximum of 68,350,664 shares of the Company’s common stock may be issued upon conversion of the Notes in full, based on the maximum conversion rate of 148.5884 shares of the Company’s common stock per $1,000 principal amount of Notes, which is subject to customary anti-dilution adjustments.
| ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS. |
(d) Exhibits.
| Exhibit |
Description | |||
| 4.1 |
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| 4.2 |
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| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||
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SIGNATURE
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.
Date: April 28, 2020
| AMERICAN EAGLE OUTFITTERS, INC. | ||
| By: |
/s/ Stacy B. Siegal | |
| Name: |
Stacy B. Siegal | |
| Title: |
Executive Vice President, General Counsel | |
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