Item 1.01.
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Entry into a Material Definitive Agreement
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Supplemental Indenture Relating to Convertible Senior
Notes
On May 23, 2017, Atlas Air Worldwide Holdings, Inc. (the Company) completed its previously announced underwritten public
offering (the
Offering
) of $289 million aggregate principal amount of the Companys 1.875% Convertible Senior Notes due 2024 (the
Notes
), which includes $29 million principal amount of Notes
issued pursuant to the partial exercise of the over-allotment option granted to the underwriters in the Offering. The Company issued the Notes pursuant to a base indenture, dated as of June 3, 2015 (the
Base Indenture
),
between the Company and Wilmington Trust, National Association, as trustee (the
Trustee
), as supplemented by the second supplemental indenture, dated May 23, 2017 (the
Supplemental Indenture
and together
with the Base Indenture, the
Indenture
) with the Trustee. The Notes will bear interest at a rate of 1.875% per year payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1,
2017. The Notes will mature on June 1, 2024, unless earlier converted or repurchased pursuant to their terms.
The initial conversion rate of the
Notes is 16.3713 shares of common stock of the Company, par value $0.01 per share (
Common Stock
), per $1,000 principal amount of the Notes (which is equivalent to an initial conversion price of approximately $61.08 per share of
Common Stock). The conversion rate for the Notes will be subject to adjustments upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole
fundamental change (as defined in the Supplemental Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert the Notes in connection with such
make-whole fundamental change.
Prior to the close of business on the business day immediately preceding September 1, 2023, the Notes will be
convertible only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2017 (and only during such calendar quarter), if the last reported sale price (as defined in
the Supplemental Indenture) of the Common Stock 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 or
equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period in which the trading price (as defined in the Supplemental Indenture) per $1,000
principal amount of the Notes for each trading day of such period was less than 98% of the product of the last reported sale price of Common Stock and the applicable conversion rate on each such trading day; or (3) upon the occurrence of
specified corporate events set forth in the Supplemental Indenture. On or after September 1, 2023, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert the Notes at any
time, regardless of the foregoing circumstances.
Upon conversion, the Notes will be settled in cash, shares of Common Stock or a combination thereof, at
the Companys election.
The Company may not redeem the Notes prior to the maturity date; however, upon the occurrence of a fundamental change (as
defined in the Supplemental Indenture), holders may require the Company to purchase all or a portion of the Notes for cash at a price equal to 100% of the principal amount of the Notes to be purchased plus any accrued and unpaid interest to, but
excluding, the applicable fundamental change repurchase date (as defined in the Supplemental Indenture).
The Notes will be the Companys senior
unsecured obligations and will rank senior in right of payment to any of the Companys indebtedness that is expressly subordinated in right of payment to the Notes, will rank equally in right of payment with any of the Companys unsecured
indebtedness that is not so subordinated, will be effectively junior in right of payment to any of the Companys secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to
all indebtedness and other liabilities of the Companys subsidiaries.
The Indenture provides for customary events of default.
1
The summary of the foregoing transactions is qualified in its entirety by reference to the text of the Base
Indenture, the Supplemental Indenture and the Global 1.875% Convertible Senior Note due June 1, 2024, which are filed as Exhibits 4.1, 4.2 and 4.3 respectively, with this Current Report on Form
8-K
and
are incorporated herein and into the Registration Statement by reference.
Convertible Note Hedge and Warrant Transactions
On May 17, 2017, the Company entered into base convertible note hedge transactions and base warrant transactions with Morgan Stanley & Co.
International plc, Citibank, N.A. and BNP Paribas (the
Option Counterparties
). In connection with the partial exercise by the Underwriters of their over-allotment option to purchase additional Notes, on May 18, 2017, the
Company entered into additional convertible note hedge transactions and additional warrant transactions with the Option Counterparties. The base convertible note hedge transactions and the additional convertible note hedge transactions are
collectively referred to hereafter as the convertible note hedge transactions. Similarly, the base warrant transactions and the additional warrant transactions are collectively referred to hereafter as the warrant
transactions.
The convertible note hedge transactions are expected generally to reduce the potential dilution to the Common Stock upon conversion
of the Notes and/or offset potential cash payments the Company is required to make in excess of the principal amount of the converted Notes in the event that the market value per share of the Common Stock, as measured under the terms of the
convertible note hedge transactions, is greater than the strike price of the convertible note hedge transactions (which strike price initially corresponds to the conversion price of the Notes and is subject to certain adjustments generally similar
to the adjustments to the conversion price contained in the Notes). On May 23, 2017, at the closing of the Offering, the Company paid an aggregate amount of approximately $70.1 million to the Option Counterparties for the convertible note
hedge transactions.
The warrant transactions allow the Option Counterparties to acquire, subject to customary anti-dilution adjustments and the net share
settlement provisions contained therein, initially 4,731,306 shares of Common Stock at a strike price of $92.20 per share, such number of shares of Common Stock and strike price subject to adjustment in accordance with the terms of the warrants. The
warrants are initially exercisable over a 140 trading day period beginning on September 1, 2024. The warrants could have a dilutive effect on the Common Stock to the extent that the market value per share of the Common Stock exceeds the strike
price of the applicable warrants under the terms of the warrant transactions. Accordingly, when the convertible note hedge transactions and the warrant transactions are taken together, the extent to which the convertible note hedge transactions
reduce the potential dilution to the Common Stock (and/or the cash payments in excess of the principal amount of the Notes) upon conversion of the Notes is effectively capped by the warrant transactions at the $92.20 strike price of the warrants
(such strike price subject to adjustment in accordance with the terms of the warrant transactions). The warrants were issued pursuant to the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended. On May 23, 2017, at
the closing of the Offering, the Company received aggregate proceeds of approximately $38.1 million from the sale of the warrants to the Option Counterparties.
The convertible note hedge transactions and the warrant transactions are each separate transactions, entered into by the Company with the Option
Counterparties, and are not part of the terms of the Notes. Holders of the Notes will not have any rights with respect to the convertible note hedge transactions or warrant transactions.
The summary of the foregoing transactions is qualified in its entirety by reference to the text of the convertible note hedge transactions confirmations
relating to the convertible note hedge transactions and the warrant transactions confirmations relating to the warrant transactions, in each case with the Option Counterparties, which are filed as Exhibits 10.1 through 10.12 to this Current Report
on
Form 8-K
and are incorporated herein by reference.