Item 1.01 Entry into a Material Agreement.
Convertible Notes and the Indenture
On December 14, 2021, Global Blood Therapeutics, Inc. (the “Company”) priced its private offering of $300.0 million in aggregate principal amount of 1.875% Convertible Senior Notes due 2028 (the “Initial Notes”). On December 15, 2021, the initial purchasers in such offering exercised their option to purchase an additional $45.0 million in aggregate principal amount of the Notes (the “Additional Notes” and together with the Initial Notes, the “Notes”), bringing the total aggregate principal amount of the Notes to $345.0 million. The Notes are the Company’s senior unsecured obligations. The Notes were issued pursuant to an Indenture, dated December 17, 2021 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable.
The Notes will mature on December 15, 2028, unless earlier converted, redeemed or repurchased. The Notes will bear interest from December 17, 2021 at a rate of 1.875% per year payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022. The Notes will be convertible at the option of the noteholders at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. The Company will settle any conversions of Notes in shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), together with cash in lieu of any fractional share, at the then-applicable conversion rate.
The conversion rate for the Notes will initially be 31.4985 shares of the Common Stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $31.75 per share of the Common Stock. The initial conversion price of the Notes represents a premium of approximately 27.5% to the $24.90 per share last reported sale price of the Common Stock on The Nasdaq Global Select Market on December 14, 2021. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.
The Company may not redeem the Notes prior to December 20, 2027. The Company may redeem for cash all or any portion of the Notes (subject to certain limitations), at its option, on or after December 20, 2027 and on or prior to the 31st scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes, which means that the Company is not required to redeem or retire the Notes periodically.
A copy of the Indenture (including the form of the Note) is attached as Exhibit 4.1 hereto and is incorporated herein by reference, and the foregoing description is qualified in its entirety by reference to such document.
Capped Call Transactions
On December 14, 2021, in connection with the pricing of the Initial Notes, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with certain initial purchasers of the Notes or their respective affiliates and certain other financial institutions (the “Option Counterparties”). On December 15, 2021, in connection with the initial purchasers’ exercise of their option to purchase the Additional Notes, the Company entered into additional privately negotiated capped call transactions with the Option Counterparties (the “Additional Capped Call Transactions,” and together with the Base Capped Call Transactions, the “Capped Call Transactions”). The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Common Stock that underlie the Notes. The Capped Call Transactions are expected generally to reduce potential dilution to the Common Stock upon conversion of any Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes,
