Array Technologies, Inc. — Form 8-K Summary
Reporting date: December 3, 2021; filed December 7, 2021. This filing reports financing and related transactions rather than quarterly or annual operating results.
Business Context and Transaction
Array Technologies completed a private offering of $375.0 million aggregate principal amount of 1.00% Convertible Senior Notes due 2028. The notes are senior unsecured obligations and mature December 1, 2028, unless earlier converted, redeemed, or repurchased.
Key Financial Terms and Metrics
| Item | Terms |
|---|---|
| Gross notes issued | $375.0 million |
| Net proceeds | Approximately $356.9 million, after discounts, commissions, estimated offering expenses, and certain STI Acquisition-related expenses |
| Interest rate | 1.00% annually, payable semiannually beginning June 1, 2022 |
| Initial conversion rate | 41.9054 shares per $1,000 principal amount |
| Initial conversion price | Approximately $23.86 per share, representing an approximately 32.5% premium to the November 30, 2021 closing price |
| Potential shares upon conversion | Up to 23,597,998 shares, assuming full exercise of the initial purchasers’ additional-notes option, subject to adjustment |
| Capped call cost | $46.65 million |
| Capped call coverage | Approximately 15.7 million common shares |
| Capped call strike and cap prices | $23.8633 and $36.0200 per share, respectively, subject to adjustment |
Use of Proceeds and Material Changes
- The company intends to use the proceeds, together with cash on hand, potential revolving-credit borrowings, and up to $50.0 million of Series A Preferred Stock, to fund cash consideration for the acquisition of Soluciones Técnicas Integrales Norland, S.L. (the STI Acquisition).
- Proceeds will also fund the capped calls and other STI Acquisition fees and expenses.
- If the initial purchasers exercise their option to buy up to an additional $50.0 million of notes, proceeds may fund additional capped calls, the STI Acquisition, and general corporate purposes, including possible repayment of part of the company’s term loan.
- The financing creates approximately $375.0 million of new senior unsecured convertible debt before any exercise of the additional-notes option.
- The capped calls are intended generally to reduce potential dilution and/or offset cash payments above principal upon note conversion, subject to the cap price and specified adjustment or termination events.
Conversion, Redemption, and Default Provisions
- Before June 1, 2028, holders may convert only upon specified conditions, including stock-price or trading-price tests, a company redemption, or certain corporate events.
- Beginning June 1, 2028, holders may convert until shortly before maturity regardless of those conditions.
- The company may redeem notes on or after December 6, 2025 if specified stock-price conditions are met, at 100% of principal plus accrued interest.
- Upon a Fundamental Change, holders may require repurchase at 100% of principal plus accrued interest, subject to the indenture.
- Events of default include missed payments, failures to honor conversion or specified reporting and transaction obligations, certain cross-defaults, bankruptcy or insolvency events, and certain unsatisfied judgments.
- The notes and any shares issued upon conversion were offered under private-placement exemptions and are not registered under the Securities Act.
Outlook, Risks, and Unusual Items
The filing does not provide operating guidance, revenue or earnings forecasts, cash-flow results, or margin information. Key financial risks include increased leverage, interest and principal repayment obligations, potential equity dilution, refinancing or liquidity needs, and the company’s ability to complete and fund the STI Acquisition. Capped calls may mitigate some dilution but are subject to extraordinary-event and market-disruption provisions that could result in adjustment or termination.
Investor Verification Points
- Verify the final amount of notes issued, including whether the additional $50.0 million option was exercised.
- Confirm the closing terms, funding sources, and final cash consideration for the STI Acquisition.
- Review the indenture for conversion triggers, redemption rights, Fundamental Change provisions, and Events of Default.
- Assess the effect of the new convertible debt and potential share issuance on leverage, liquidity, and dilution.
- Review the capped call confirmations for termination, adjustment, and counterparty risks.
- Reconcile the stated net proceeds and the $46.65 million capped-call payment with subsequent balance-sheet and cash-flow disclosures.