New York, NY (Top40 Charts) Pandora Media, Inc. ("
Pandora") (NYSE:P) today announced the pricing of $300 million aggregate principal amount of convertible senior notes due 2020 (the "notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Act").
Pandora also granted
Morgan Stanley & Co. LLC ("Morgan Stanley"), the initial purchaser of the notes, a 30-day option to purchase up to an additional $45 million aggregate principal amount of the notes. The sale of the notes to the initial purchaser is expected to settle on December 9, 2015, subject to customary closing conditions, and is expected to result in approximately $292.7 million in net proceeds to
Pandora after deducting the initial purchaser's discount and estimated offering expenses payable by
Pandora (assuming no exercise of the initial purchaser's option to purchase additional notes).
Morgan Stanley is acting as sole bookrunner for the offering.
The notes will be senior, unsecured obligations of Pandora. The notes will bear interest at a rate of 1.75% per year. Interest will be payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2016. The notes will mature on December 1, 2020, unless earlier repurchased, redeemed or converted.
Pandora expects to use approximately $37.5 million of the net proceeds of the offering of the notes to pay the cost of the capped call transactions described below, and to use the remaining proceeds of the offering for general corporate purposes.
The initial conversion rate for the notes is 60.9050 shares of common stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $16.42 per share). Prior to the close of business on the business day immediately preceding July 1, 2020, the notes will be convertible at the option of the note holders only upon the satisfaction of specified conditions and during certain periods. Thereafter until the close of business on the second scheduled trading day preceding the maturity date, the notes will be convertible at the option of the noteholders at any time regardless of these conditions. Conversions of the notes will be settled in cash, shares of Pandora's common stock or a combination thereof, at Pandora's election. The last reported sale price of Pandora's common stock on December 3, 2015 was $12.63 per share.
Holders may require
Pandora to repurchase their notes upon the occurrence of a fundamental change (as defined in the indenture governing the notes) at a purchase price equal to the principal amount thereof plus accrued and unpaid interest to, but excluding, the repurchase date.
Pandora may not redeem the notes prior to December 5, 2018. On or after December 5, 2018,
Pandora may redeem for cash all or part of the notes if the last reported sale price of Pandora's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, any of the five trading days prior to the date on which
Pandora provides notice of redemption. The redemption price for the notes will equal the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
In connection with the pricing of the notes,
Pandora entered into privately negotiated capped call transactions with
Morgan Stanley and JP
Morgan Chase Bank,
National Association (the "option counterparties"). The capped call transactions are expected generally to reduce the potential dilution to Pandora's common stock upon any conversion of notes and/or offset the cash payments
Pandora is required to make in excess of the principal amount of the converted notes in the event that the market price of Pandora's common stock is greater than the strike price of the capped call transactions (which initially corresponds to the initial conversion price of the notes and is subject to certain adjustments under the terms of the capped call transactions), with such reduction and/or offset subject to a cap based on the cap price of the capped call transactions. The cap price of the capped call transactions will initially be $25.26 per share, representing a premium of approximately 100% above the closing price of $12.63 per share of Pandora's common stock on December 3, 2015, and is subject to certain adjustments under the terms of the capped call transactions. If the initial purchaser exercises its option to purchase additional notes,
Pandora intends to enter into additional capped call transactions with the option counterparties.
