Item 1.01 Entry into a Material Definitive Agreement.
Conversion and Repurchase Agreement
On February 28, 2024, APi Group Corporation (the “Company”) entered into a Conversion and Repurchase Agreement (the “Conversion and Repurchase Agreement”) with Juno Lower Holdings L.P., a Delaware limited partnership (“Juno Lower Holdings”), FD Juno Holdings L.P., a Delaware limited partnership (“FD Juno Holdings”, and together with Juno Lower Holdings, the “Blackstone Parties”), Viking Global Equities Master Ltd., a Cayman Islands exempted company (“VGEM”), and Viking Global Equities II LP, a Delaware limited partnership (“VGE II”, and collectively with VGEM, the “Viking Parties” and collectively with the Blackstone Parties, the “Series B Holders” and each, a “Series B Holder”). Pursuant to the Conversion and Repurchase Agreement, (i) each of the Series B Holders exercised its respective right to effect an Optional Conversion (as defined in the Certificate of Designation) pursuant to the Certificate of Designation of the 5.5% Series B Perpetual Convertible Preferred Stock, par value $0.0001 per share (“Series B Preferred Shares”) (the “Certificate of Designation”) with respect to all of such Series B Holder’s Series B Preferred Shares, at the conversion price of $24.60 per share of the Company’s common stock, par value $0.0001 per share (“Common Stock”), (ii) the Company shall issue to the Series B Holders an aggregate of 32,803,519 shares of Common Stock upon conversion (inclusive of approximately 283,196 shares attributable to accrued and unpaid dividends thereon), and (iii) the Company shall immediately thereafter repurchase an aggregate of 16,260,160 shares of Common Stock from the Series B Holders for a price of $36.90 per share, for an aggregate purchase price of $600 million (the “Share Repurchase”), with the Blackstone Parties receiving $450 million in value and the Viking Parties receiving $150 million in value. The shares of Common Stock subject to the repurchase consist of 12,195,121 shares from the Blackstone Parties and 4,065,039 shares from the Viking Parties. Following the conversion there are no Series B Preferred Shares issued or outstanding.
The Company funded the Share Repurchase through a combination of (i) an incremental term loan facility under the Company’s existing Credit Agreement (as defined below) in the aggregate principal amount of $300 million that was issued at par and shall be fungible with the existing 2021 Incremental Term Loans to the Blackstone Parties, in the amount of $225 million, and to the Viking Parties, in the amount of $75 million, (ii) a drawdown under the Company’s existing revolving credit facility and (iii) cash on hand.
Pursuant to the Conversion and Repurchase Agreement, the Series B Holders intend to effect an underwritten secondary public offering of approximately 8,130,082 shares of Common Stock held by them (plus any additional shares that may be sold pursuant to any option granted to the underwriters) pursuant to and in accordance with the Company’s obligations under the respective registration rights agreements between the Company and the Series B Holders. The Series B Holders also agreed to a 90-day lock-up on all shares of Common Stock owned by them other than shares repurchased by the Company in the Share Repurchase or sold in the secondary public offering and other customary exceptions.
Incremental Term Loan Financing
On February 28, 2024, the Company and its wholly owned borrower subsidiary, APi Group DE, Inc., (“Borrower”) entered into Amendment No. 5 to Credit Agreement (“Amendment No. 5”) by and among Borrower, the Company, as a guarantor, the Company subsidiary guarantors named therein, Citibank, N.A., as collateral agent and as administrative agent, the Blackstone Parties and the Viking Parties as lenders, which amends the Credit Agreement, dated as of October 1, 2019, as amended by Amendment No. 1 to Credit Agreement, dated as of October 22, 2020, Amendment No. 2 to Credit Agreement, dated December 16, 2021, Amendment No. 3 to Credit Agreement, dated May 19, 2023, and Amendment No. 4 to Credit Agreement, dated October 11, 2023, by and among Borrower, the Company, the Company subsidiary guarantors from time to time party thereto, the lenders and letter of credit issuers from time to time party thereto, and Citibank, N.A. as administrative agent and collateral agent (as amended, supplemented or modified from time to time, the “Credit Agreement”). Pursuant to Amendment No. 5, the 2021 Incremental Term Loans incurred by the Borrower under Amendment No. 4 to the Credit Agreement (the “2021 Incremental Term Loans”) were upsized by an aggregate principal amount equal to $300 million (the “Incremental Term Loan”) and issued at par and shall be fungible with the existing 2021 Incremental Term Loans, which loan proceeds were directed exclusively to the Blackstone Parties and the Viking Parties as consideration for a portion of the purchase price for the Share Repurchase.
The interest rate applicable to the Incremental Term Loan is the same as the 2021 Incremental Term Loans: at the Company’s option, either (a) a base rate plus an applicable margin equal to 1.50% per annum or (b) a Term
