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“Interest will be payable semi-annually”
Avid (Nasdaq:AVID) today announced its intention to offer, subject to market and other conditions, $115 million aggregate principal amount of its convertible senior notes due 2020 in a private placement to qualified institutional buyers . Avid also expects to grant the initial purchasers of the notes an option to purchase up to an additional $15.0 million aggregate principal amount of the notes.
The notes will be senior unsecured obligations of Avid, and interest will be payable semi-annually. Prior to December 15, 2019, the notes will be convertible at the option of holders only upon the occurrence of specified events; thereafter, until the second scheduled trading day prior to the maturity date of June 15, 2020, the notes will be convertible at any time. Upon conversion, Avid will pay or deliver, as the case may be, cash, shares of Avid’s common stock or a combination of cash and Common Stock, at Avid’s election. Avid will not have the right to redeem the notes prior to maturity. Final terms of the notes, including the interest rate, conversion rate and other terms, will be determined by negotiations between Avid and the initial purchasers of the notes.
In connection with the pricing of the notes, Avid plans to enter into a capped call transaction with an affiliate of one of the initial purchasers. The capped call transaction is expected generally to reduce potential dilution to the Common Stock and/or offset cash payments Avid would have to make in excess of the principal amount of any converted notes in the event that the market price per share of Common Stock, as measured under the terms of the capped call transaction, is greater than the strike price of the capped call transaction, which is expected to initially correspond to the conversion price of the notes and be subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the notes. If the initial purchasers exercise their option to purchase additional notes, Avid may enter into an additional capped call transaction with the option counterparty.
In connection with establishing its initial hedge of the capped call transaction, the option counterparty and/or its affiliates expect to enter into various derivative transactions with respect to the Common Stock and/or purchase Common Stock in secondary market transactions concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of the Common Stock or the notes at that time.
In addition, the option counterparty and/or its affiliate may modify their hedge positions by entering into or unwinding various derivatives with respect to the Common Stock and/or purchasing or selling the Common Stock or other securities of Avid in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during, and potentially prior to, any observation period related to a conversion of notes). This activity could also cause or avoid an increase or a decrease in the market price of the Common Stock or the notes, which could affect the ability of holders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of notes, it could affect the number of shares and/or value of the consideration that holders will receive upon conversion of the notes.
Avid intends to use the net proceeds from the offering of the notes to fund Avid’s acquisition of Orad Hi-Tec Systems, Ltd. and pay the cost of the capped call transaction. Avid also (i) intends to use a portion of the remaining net proceeds from this offering to repurchase shares of its Common Stock, (ii) may use up to $18.4 million of the remaining net proceeds from this offering to repay outstanding borrowings under Avid’s senior secured revolving credit facilities with Wells Fargo Capital Finance, LLC, and (iii) intends to use the remaining proceeds from this offering for working capital and other general corporate purposes.
In connection with the proposed offering, Avid’s Board of Directors authorized the repurchase of up to $20 million of Common Stock (inclusive of the capped call transaction), concurrently with the consummation of the offering and thereafter from time to time.
