| Item 1.01. | Entry into a Material Definitive Agreement. |
Indenture and Notes
On November 3, 2023, Western Digital Corporation (“Western Digital”) issued $1.6 billion aggregate principal amount of its 3.00% convertible senior notes due 2028 (the “Notes”), including $200 million aggregate principal amount issued pursuant to the exercise in full of the initial purchasers’ option to purchase additional Notes. The Notes were issued pursuant to an indenture, dated as of November 3, 2023 (the “Indenture”), among (i) Western Digital, (ii) Western Digital Technologies, Inc., as guarantor, and (iii) U.S. Bank Trust Company, National Association, as trustee.
Western Digital received net proceeds from the offering of approximately $1,563 million, after deducting the initial purchasers’ discount and estimated offering expenses payable by Western Digital. Western Digital used (1) approximately $155 million of the net proceeds of the offering to pay the cost of entering into capped call transactions described below and (2) approximately $507 million of the net proceeds of the offering to pay the purchase price for the refinancing through private repurchases of approximately $508 million in aggregate principal amount of Western Digital’s existing 1.50% convertible senior notes due 2024 (the “Existing Convertible Notes”) and intends to use the remainder (3) to repay the remaining principal amount owed on the Existing Convertible Notes on the maturity date of the Existing Convertible Notes or prior to such date through further private repurchases, and (4) after the application of the proceeds in accordance with clauses (1) – (3) (or, with respect to clause (3), if Western Digital holds the requisite amount of funds to be used in accordance with such clause), for general corporate purposes, which may include repayment or repurchase of certain of Western Digital’s outstanding non-convertible debt securities through tender offers, open market or privately negotiated repurchases, redemption or otherwise or repayment of any of Western Digital’s other indebtedness.
The Notes are senior unsecured obligations of Western Digital and will be guaranteed, jointly and severally, on a senior unsecured basis by each of Western Digital’s wholly-owned subsidiaries from time to time guaranteeing Western Digital’s 4.75% senior unsecured notes due 2026 (the “2026 Notes”) (initially, Western Digital Technologies, Inc.) or that is a guarantor or obligor with respect to certain refinancing indebtedness with respect to the 2026 Notes. The Notes will bear interest at a rate of 3.00% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, beginning on May 15, 2024. The Notes will mature on November 15, 2028, unless earlier repurchased, redeemed or converted in accordance with their terms.
The initial conversion rate of the Notes is 19.1589 shares of Western Digital’s common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $52.20 per share of Western Digital’s common stock). The initial conversion price represents a premium of approximately 30% to the $40.15 per share closing price of Western Digital’s common stock on October 31, 2023. Upon any conversion of the Notes, Western Digital will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of Western Digital’s common stock or a combination of cash and shares of Western Digital’s common stock, at Western Digital’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the Notes being converted.
Holders may convert their Notes at their option at any time prior to the close of business on the business day immediately preceding August 15, 2028, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2023 (and only during such calendar quarter), if the last reported sale price of Western Digital’s 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 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 ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Western Digital’s common stock and the conversion rate on each such trading day, (3) if Western Digital calls such Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption, or (4) upon the occurrence of specified corporate events. On or after August 15, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances.
