| Item 1.01 | Entry into a Material Definitive Agreement |
On February 6, 2025, Guardant Health, Inc. (the “Company”) entered into privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders of its outstanding 0% Convertible Senior Notes due 2027 (the “2027 Notes”), pursuant to which the Company will issue $600 million aggregate principal amount of 1.25% Convertible Senior Notes due 2031 (the “New Notes”) in exchange for the retirement of approximately $659.3 million principal amount of 2027 Notes (the “Transactions”). Following the closing of the Transactions, which is expected to occur on or about February 14, 2025 (the “Closing Date”), subject to customary closing conditions, approximately $490.7 million in aggregate principal amount of 2027 Notes will remain outstanding with terms unchanged.
In connection with the Transactions, the Company intends to repurchase approximately $45 million of shares of its common stock (the “common stock”), from certain participants in the Transactions through a financial intermediary at the last reported sale price of the common stock on February 6, 2025, and the Company has been advised that the exchange agent for the Exchange Transactions intends to purchase approximately $35 million of shares of the Company’s common stock from certain participants in the Transactions through a financial intermediary at the last reported sale price of the common stock on February 6, 2025.
The New Notes will be issued pursuant to, and governed by, an indenture (the “New Notes Indenture”), dated as of the Closing Date, between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). When issued pursuant to the New Notes Indenture, the New Notes will be senior unsecured obligations of the Company and will bear interest at a rate of 1.25% per annum, payable semi-annually in arrears on each February 15 and August 15, commencing on August 15, 2025. Special interest may accrue on the New Notes in certain circumstances at a rate per annum not to exceed 0.50% (subject to certain exceptions). The New Notes will mature on February 15, 2031, unless earlier repurchased, redeemed or converted.
Before November 15, 2030, noteholders will have the right to convert their New Notes only upon the occurrence of certain events. From and after November 15, 2030, noteholders may convert their New Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate will be 16.0716 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $62.22 per share of common stock, which reflects a conversion premium of approximately 35% to the last reported sale price of the Company’s common stock on February 6, 2025. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.
The Company may not redeem the New Notes at its option at any time before February 21, 2028. The New Notes will be redeemable, in whole or in part (subject to the “Partial Redemption Limitation” (as defined in the New Notes Indenture)), at the Company’s option at any time, and from time to time, on or after February 21, 2028 and on or before the 25th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the New Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any New Note for redemption will constitute a Make-Whole Fundamental Change with respect to that New Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.
The New Notes Indenture will provide that, if certain corporate events that constitute a “Fundamental Change” (as defined in the New Notes Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their New Notes at a cash repurchase price equal to the principal amount of the New Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.
