Kaman Corporation (NYSE:KAMN) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.
| Entry into a Material Definitive Agreement. |
Purchase Agreement
On May8, 2017, Kaman Corporation (the Company) entered into a
purchase agreement (the Purchase Agreement) with certain
qualified institutional buyers (collectively the Initial
Purchasers) to which the Company agreed to sell $175,000,000
aggregate principal amount of 3.25% convertible senior notes due
2024 (the Initial Convertible Notes) in a private placement to
Rule 144A under the Securities Act of 1933, as amended (the
Securities Act). The Company also agreed to grant a 13-day option
to the Initial Purchasers to purchase all or part of an
additional $25,000,000 aggregate principal amount of its 3.25%
convertible senior notes due 2024 (the Additional Convertible
Notes) to cover over-allotments. The Initial Convertible Notes,
together with any Additional Convertible Notes, if and when
issued, are referred to herein as the Convertible Notes.
The Purchase Agreement includes customary representations,
warranties and covenants. Under the terms of the Purchase
Agreement, the Company has agreed to indemnify the Initial
Purchasers against certain liabilities, and contribute to
payments which the Initial Purchasers may be required to make in
respect of any such liabilities.
Indenture
The sale of the Initial Convertible Notes closed on May12, 2017.
The Initial Convertible Notes were issued to an indenture, dated
May12, 2017 (the Indenture), between the Company and U.S. Bank
National Association, as trustee.
The Company will pay interest on the Convertible Notes
semiannually in arrears at a rate of 3.25% per annum on May1 and
November1 of each year commencing on November1, 2017. The
Convertible Notes are convertible based upon an initial
conversion rate of 15.3227 shares of the Companys common stock
per $1,000 principal amount of Convertible Notes (equivalent to a
conversion price of approximately $65.26 per share of the
Companys common stock). The conversion rate will be subject to
adjustment upon the occurrence of certain specified events, but
will not be adjusted for accrued and unpaid interest. The Company
will settle any conversions of the Convertible Notes in cash,
shares of the Companys common stock or a combination thereof, at
the Companys election.
The Convertible Notes mature on May1, 2024, unless earlier
purchased by the Company or converted. Prior to November1, 2023,
holders may convert all or a portion of their Convertible Notes
only under the following circumstances: (1)during any fiscal
quarter commencing after the fiscal quarter ending on July1, 2017
(and only during such fiscal quarter), if the last reported sale
price of the Companys common stock for at least 20 trading days
(whether or not consecutive) during a period of 30 consecutive
trading days ending on, and including, the last trading day of
the immediately preceding fiscal 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 ten consecutive
trading day period (the measurement period) in which the trading
price per $1,000 principal amount of Convertible Notes for each
trading day of the measurement period was less than 98% of the
product of the last reported sale price of the Companys common
stock and the conversion rate on each such trading day; or
(3)upon the occurrence of specified corporate events. On and
after November1, 2023 until the close of business on the second
scheduled trading day immediately preceding the maturity date,
holders may convert their Convertible Notes at any time,
regardless of the foregoing circumstances. The conversion rate
may be adjusted upon the occurrence of certain corporate events,
including certain distributions and dividends to all or
substantially all of the Companys common stockholders. The
holders of the Convertible Notes who convert their Convertible
Notes in connection with a make-whole fundamental change (as
defined in the Indenture) may be entitled to a make-whole premium
in the form of an increase in the conversion rate of the
Convertible Notes.
The Company may not redeem the Convertible Notes; however, upon
the occurrence of a fundamental change (as defined in the
Indenture), holders may require the Company to repurchase all or
a portion of their Convertible Notes for cash at a price equal to
50% of the principal amount of the Convertible Notes to be
repurchased plus any accrued and unpaid interest to, but
excluding, the fundamental change repurchase date.
The Indenture contains customary terms and covenants, including
that upon certain events of default occurring and continuing,
either the Trustee or the holders of not less than 25% in
aggregate principal amount of the Convertible Notes then
outstanding may declare the entire principal amount of all the
Convertible Notes plus accrued interest, if any, to be
immediately due and payable.
The Convertible Notes are general unsecured obligations of the
Company. The Convertible Notes rank senior in right of payment to
any of the Companys future indebtedness that is expressly
subordinated in right of payment to the Convertible Notes; rank
equal in right of payment to the Companys existing and future
unsecured indebtedness that is not so subordinated; are
effectively subordinated in right of payment to any of the
Companys secured indebtedness to the extent of the value of the
assets securing such indebtedness; and are structurally
subordinated to all existing and future indebtedness and
liabilities of the Companys subsidiaries.
The net proceeds from the sale of the Initial Convertible Notes
were approximately $168.4million, after deducting the Initial
Purchasers discounts and the estimated offering expenses payable
by the Company. The Company used approximately $17.9million of
the net proceeds from the offering to pay the cost of the Capped
Call Transactions (as defined below). The Company used the
remainder of the net proceeds from the offering, along with cash
received from the Existing Option Counterparties (as defined
below) in connection with the termination of the convertible note
hedge transactions referred to in Item 1.02 below, to repay
existing indebtedness, including using $165.3million to
repurchase approximately $103.5million principal amount of the
Companys existing convertible notes due on November15, 2017 (the
Existing Convertible Notes) from a limited number of holders in
privately negotiated transactions, which amount includes accrued
and unpaid interest on such Existing Convertible Notes to the
date of repurchase. The repurchase of approximately $102.5
million principal amount of Existing Convertible Notes settled on
May 12, 2017. The Company has been informed by certain parties
that the repurchase of the final approximately $1 million
principal amount of Existing Convertible Notes is expected to
settle on May 15, 2017.
Capped Call Transactions
In connection with the pricing of the Initial Convertible Notes,
the Company entered into privately negotiated capped call
transactions (the Capped Call Transactions) with certain of the
Initial Purchasers (or their affiliates) (the Option
Counterparties). The Capped Call Transactions cover,
collectively, the number of shares of the Companys common stock
underlying the Initial Convertible Notes, subject to
anti-dilution adjustments substantially similar to those
applicable to the Convertible Notes. The cost of the Capped Call
Transactions was approximately $17.9million.
The Capped Call Transactions are expected generally to reduce the
potential dilution and/or offset the cash payments the Company is
required to make in excess of the principal amount upon
conversion of the Initial Convertible Notes in the event that the
market price per share of the Companys common stock is greater
than the strike price of the Capped Call Transactions (which
initially corresponds to the initial conversion price of the
Initial Convertible 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 $88.7570 per share, which
represents a premium of approximately 70% over the last reported
sale price of the Companys common stock on May8, 2017, and is
subject to certain adjustments under the terms of the Capped Call
Transactions.
The Capped Call Transactions are separate transactions, in each
case, entered into by the Company with the Option Counterparties,
and are not part of the terms of the Convertible Notes and will
not affect any holders rights under the Convertible Notes.
Holders of the Convertible Notes will not have any rights with
respect to the Capped Call Transactions. If the Initial
Purchasers exercise their over-allotment option, the Company
expects to use a portion of the proceeds from the sale of the
Additional Convertible Notes to enter into additional capped call
transactions with the Option Counterparties on substantially
similar terms.
Credit Agreement Amendment
On May8, 2017, the Company entered into Amendment No.1 (Amendment
No.1) to the Amended and Restated Credit Agreement, dated as of
May6, 2015, by and among the Company, RWG Germany GmbH, Kaman
Composites UK Holdings Limited and the other subsidiary borrowers
from time to time party thereto, the Lenders from time to time
party thereto, JPMorgan Chase Bank, N.A., as Administrative
Agent, Bank of America, N.A. and Citizens Bank, N.A., as
Co-Syndication Agents, and SunTrust Bank, KeyBank National
Association, TD Bank, N.A., Branch Banking and Trust Company and
Fifth Third Bank, as Co-Documentation Agents, to permit the
offering of the Convertible Notes and the entering into of the
Capped Call Transactions.
The foregoing descriptions of the Indenture, Amendment No.1, the
Purchase Agreement and the Capped Call Transactions are summaries
and are qualified in their entirety by the copies of the
Indenture, Amendment No.1, the Purchase Agreement and the Letter
Agreements with respect to the Capped Call Transactions attached
hereto as Exhibits 4.1, 10.1, 10.2, 10.3, 10.4 and 10.5, which
are incorporated herein by reference.
| Item1.02. |
Termination of a Material Definitive Agreement. |
In connection with its initial issuance of Existing Convertible
Notes in November 2010, the Company previously entered into
convertible note hedge transactions and warrant transactions (the
Existing Call Spread Transactions) with certain financial
institutions (the Existing Option Counterparties). Together with
the repurchase of a portion of the Existing Convertible Notes
described in Item 1.01 above, the Company entered into agreements
with the Existing Option Counterparties to terminate a portion of
such Existing Call Spread Transactions in a notional amount
corresponding to the amount of the Existing Convertible Notes
repurchased. In connection with the termination of such Existing
Call Spread Transactions, the Existing Option Counterparties paid
to the Company an aggregate of approximately $58.6million and the
Company delivered to the Existing Option Counterparties an
aggregate of 624,044 shares of the Companys common stock.
In connection with the termination of such Existing Call Spread
Transactions and the expected related unwinding of the existing
hedge position of the Existing Option Counterparties with respect
to such transactions, the Existing Option Counterparties and/or
their respective affiliates may sell shares of the Companys
common stock in secondary market transactions, and/or unwind
various derivative transactions with respect to the Companys
common stock. This activity could decrease (or reduce the size of
any increase in) the market price of the Companys common stock at
that time and it could decrease (or reduce the size of any
increase in) the market value of the Convertible Notes. In
connection with these transactions, the Company may make or
receive payments in amounts that depend on the market price of
its common stock during the unwind period.
The foregoing description of the partial termination of the
Existing Call Spread Transactions is a summary and is qualified
in its entirety by the copies of the call option termination
agreements and warrant termination agreements attached hereto as
Exhibits 10.6, 10.7, 10.8, 10.9, 10.10 and 10.11, which are
incorporated herein by reference.
| Item2.03. |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth under Item 1.01 of this Current Report
on Form 8-K is incorporated herein by reference.
| Item3.02. | Unregistered Sale of Equity Securities. |
The information set forth under Items 1.01 and 1.02 of this
Current Report on Form 8-K is incorporated herein by reference.
The Companys offering of the Initial Convertible Notes to the
Initial Purchasers was made in reliance on the exemption from
registration provided by Section 4(a)(2) of the Securities Act.
The Company relied on this exemption from registration based in
part on representations made by the Initial Purchasers in the
Purchase Agreement, including that the Initial Purchasers would
only offer, sell or deliver the Initial Convertible Notes to
persons inside the United States whom they reasonably believe to
be qualified institutional buyers within the meaning of Rule 144A
under the Securities Act.
The Initial Convertible Notes and the shares of the Companys
common stock issuable upon conversion of the Initial Convertible
Notes have not been registered under the Securities Act and may
not be offered or sold in the United States absent registration
or applicable exemption from registration requirements.
The issuance of shares of the Companys common stock to the
Existing Options Counterparties in connection with the partial
termination of the existing warrant transactions has been issued
in transactions exempt from registration under the Securities Act
by virtue of Section 3(a)(9) thereof.
| Item9.01. | Financial Statements and Exhibits. |
(d)Exhibits.
|
Exhibit Number |
Description |
|
| 4.1 |
Indenture, dated as of May12, 2017, by and between Kaman Corporation and U.S. Bank National Association, as trustee |
|
| 10.1 |
Amendment No.1 to Amended and Restated Credit Agreement, dated as of May6, 2015, by and among Kaman Corporation, RWG Germany GmbH, Kaman Composites UK Holdings Limited and the other subsidiary borrowers from time to time party thereto, the Lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citizens Bank, N.A., as Co-Syndication Agents, and SunTrust Bank, KeyBank National Association, TD Bank, N.A., Branch Banking and Trust Company and Fifth Third Bank, as Co-Documentation Agents |
|
| 10.2 |
Purchase Agreement, dated May8, 2017, among Kaman Corporation and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner Smith Incorporated, as representatives of the several Initial Purchasers |
|
| 10.3 |
Letter Agreement, dated May8, 2017, between Bank of America, N.A. and Kaman Corporation, regarding the Capped Call Transaction |
|
| 10.4 |
Letter Agreement, dated May8, 2017, between JPMorgan Chase Bank, National Association, London Branch and Kaman Corporation, regarding the Capped Call Transaction |
|
| 10.5 |
Letter Agreement, dated May8, 2017, between UBS AG, London Branch and Kaman Corporation, regarding the Capped Call Transaction |
|
| 10.6 |
Call Option Termination Agreement, dated May8, 2017, between Goldman Sachs Co. LLC and Kaman Corporation |
|
| 10.7 |
Call Option Termination Agreement, dated May8, 2017, between Bank of America, N.A. and Kaman Corporation |
|
| 10.8 |
Call Option Termination Agreement, dated May8, 2017, between The Royal Bank of Scotland plc and Kaman Corporation |
|
| 10.9 |
Warrant Termination Agreement, dated May8, 2017, between Goldman Sachs Co. LLC and Kaman Corporation |
|
| 10.10 |
Warrant Termination Agreement, dated May8, 2017, between Bank of America, N.A. and Kaman Corporation |
|
| 10.11 |
Warrant Termination Agreement, dated May8, 2017, between The Royal Bank of Scotland plc and Kaman Corporation |
About Kaman Corporation (NYSE:KAMN)
Kaman Corporation conducts business in the aerospace and distribution markets. The Company operates through two segments: Distribution and Aerospace. Its Distribution segment is a power transmission, motion control, electrical and automation, and fluid power industrial distributor. It provides products, including bearings, mechanical and electrical power transmission, fluid power, motion control, automation, material handling components, electrical control and power distribution, and maintenance, repair and overhaul (MRO) supplies to a spectrum of industrial markets. Its Aerospace segment produces and markets aircraft bearings and components; super precision, miniature ball bearings; safe and arming solutions; subcontract helicopter work; restoration, modification and support of its SH-2G Super Seasprite maritime helicopters; manufacture and support of its K-MAX manned and unmanned medium-to-heavy lift helicopters, and engineering design, analysis and certification services. Kaman Corporation (NYSE:KAMN) Recent Trading Information
Kaman Corporation (NYSE:KAMN) closed its last trading session down -0.50 at 48.52 with 245,784 shares trading hands.