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Item 1.01.
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Entry into a Material Definitive Agreement.
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On November 13, 2019, Invacare Corporation (the “Company”) entered into separate privately negotiated agreements (the “Agreements”) with certain holders of its 5.00% Convertible Senior Notes due 2021 (the “2021 Notes”) to exchange $72.9 million in aggregate principal amount of 2021 Notes (the “Exchange Transactions”), for aggregate consideration of $72.9 million in aggregate principal amount of new 5.00% Convertible Senior Exchange Notes due 2024 (the “New Notes”) of the Company and approximately $6.9 million in cash.
The Exchange Transactions closed on November 19, 2019. Following the closing of the Exchange Transactions, $61.1 million in aggregate principal amount of 2021 Notes remains outstanding.
The New Notes were issued pursuant to an Indenture (the “Indenture”), entered into on November 19, 2019 by and between the Company and Wells Fargo Bank, N.A., as trustee (the “Trustee”). The New Notes bear interest at a fixed rate of 5.00% per year, payable semiannually in arrears on May 15 and November 15 of each year, beginning May 15, 2020. Interest on the New Notes accrues from August 15, 2019. The New Notes will mature on November 15, 2024 (the “Maturity Date”), unless earlier repurchased, redeemed or converted.
The initial conversion rate for the New Notes is 67.6819 of the Company’s common shares (“Common Shares”) (subject to adjustment as provided for in the Indenture) per $1,000 principal amount of New Notes, which is equal to an initial conversion price of approximately $14.78 per share, representing a conversion premium of approximately 50% above the last reported sale price of the Common Shares of $9.85 on November 13, 2019. In addition, following (i) a redemption of the New Notes by the Company at its election under certain circumstances as described in the Indenture or (ii) certain corporate events that occur prior to the Maturity Date as described in the Indenture, the Company will pay a make-whole premium by increasing the conversion rate for a holder who elects to convert its New Notes in connection with such a redemption or corporate event in certain circumstances.
Prior to the Maturity Date, the Company may, at its election, redeem for cash all or part of the New Notes if the last reported sale price of the Common Shares equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the New Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date (subject to certain limited exceptions). No sinking fund is provided for the New Notes, which means the Company is not required to redeem or retire the New Notes periodically.
Holders of the New Notes may convert their New Notes at their option at any time prior to the close of business on the business day immediately preceding May 15, 2024 in multiples of $1,000 principal amount, only under the following circumstances:
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during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Common Shares for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price for the New Notes on each applicable trading day;
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during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of New Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Common Shares and the conversion rate for the New Notes on each such trading day;
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upon the occurrence of specified corporate events described in the Indenture; or
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if the Company calls the New Notes for redemption pursuant to the terms of the Indenture.
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On or after May 15, 2024 until the close of business on the second scheduled trading day immediately preceding the Maturity Date, holders may convert their New Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, Common Shares or a combination of cash and Common Shares, at its election.
If the Company undergoes a fundamental change, as described in the Indenture, prior to the Maturity Date, holders of the New Notes will, subject to specified conditions, have the right, at their option, to require the Company to repurchase for cash all or a portion of their New Notes at a repurchase price equal to 100% of the principal amount of the New Notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the “fundamental change repurchase date” (as defined in the Indenture).
The Indenture provides for customary events of default. In the case of an event of default with respect to the New Notes arising from specified events of bankruptcy or insolvency, all outstanding New Notes will become due and payable immediately without further action or notice. If any other event of default with respect to the New Notes under the Indenture occurs or is continuing, the Trustee or holders of at least 25% in aggregate principal amount of the then outstanding New Notes may declare the principal amount of the New Notes to be immediately due and payable.
The New Notes are senior unsecured obligations of the Company and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the New Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated, including the 2021 Notes; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
The description of the Agreements, the Indenture and the New Notes above is qualified in its entirety by reference to the Indenture and the form of New Notes, which are filed as Exhibit 4.1, and the form of the Agreements, which is filed as Exhibit 10.1, to this Current Report on Form 8-K and are incorporated herein by reference.
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Item 2.03.
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Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.
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The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.