On January 25, 2021 BridgeBio Pharma, Inc. (Nasdaq: BBIO) (the "Company," "we" or "BridgeBio") reported that it intends to offer, subject to market conditions and other factors, $400 million aggregate principal amount of convertible senior notes due 2029 (the "notes") in a private offering (the "offering") to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act") (Press release, BridgeBio, JAN 25, 2021, View Source [SID1234576238]). In connection with the offering, the Company expects to grant the initial purchasers an option to purchase up to an additional $60 million aggregate principal amount of notes.
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The final terms of the notes, including the initial conversion rate, interest rate and certain other terms, will be determined at the time of pricing. The notes will bear interest semi-annually and will mature on February 1, 2029, unless earlier converted, redeemed or repurchased. Prior to November 1, 2028, the notes will be convertible only upon satisfaction of certain conditions and during certain periods. Thereafter, the notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The notes will be convertible at the option of the holders, subject to certain conditions and during certain periods, into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, with the form of consideration determined at the Company’s election.
The Company may not redeem the notes prior to February 6, 2026. On or after February 6, 2026 and on or before the 41st scheduled trading day immediately before the maturity date of the notes, the Company may redeem for cash all or any portion of the notes, at its option at any time, and from time to time, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Holders of the notes will have the right to require the Company to repurchase all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of certain events.
When issued, the notes will be the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s unsecured indebtedness that is expressly subordinated in right of payment to the notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated (including the Company’s 2.50% Convertible Senior Notes due 2027); effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
In connection with the pricing of the notes, the Company expects to enter into privately negotiated capped call transactions with one or more of the initial purchasers and/or their respective affiliates or other financial institutions (the "option counterparties"). These capped call transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction of potential dilution and/or offset of cash payments subject to a cap.
The Company has been advised that, in connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates expect to enter into various derivative transactions with respect to the Company’s common stock concurrently with or shortly after the pricing of the notes and/or purchase shares of the Company’s common stock concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of the Company’s common stock, the notes or the Company’s 2.50% Convertible Senior Notes due 2027 at that time. In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to the Company’s common stock and/or purchasing or selling the Company’s common stock or other securities of the Company in secondary market transactions following the pricing of the notes and prior to maturity of the notes (and are likely to do so following any conversion of the notes, any redemption date or any repurchase of the notes by the Company on any fundamental change repurchase date or otherwise, in each case, if the Company exercises the relevant election under the capped call transactions). This activity could also cause or avoid an increase or a decrease in the market price of the Company’s common stock or the notes, which could affect the ability of holders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of the notes, it could affect the number of shares of the Company’s common stock, if any, and value of the consideration that holders will receive upon conversion of the notes.
Further, if any such capped call transactions fail to become effective, whether or not the offering of notes is completed, the option counterparties or their respective affiliates may unwind their hedge positions with respect to the Company’s common stock, which could adversely affect the value of the Company’s common stock and, if the notes have been issued, the value of the notes.
The Company intends to use a portion of the net proceeds from the offering of the notes to pay the cost of the capped call transactions, and up to approximately $50 million of the net proceeds from the offering to repurchase shares of its common stock from certain purchasers of the notes in privately negotiated transactions effected through one or more of the initial purchasers or an affiliate thereof concurrently with the pricing of the notes (such transactions, the "share repurchases"). If the initial purchasers exercise their option to purchase additional notes, the Company expects to use a portion of the net proceeds from the sale of such additional notes to enter into additional capped call transactions.
The Company intends to use the remainder of the net proceeds from the offering for general corporate purposes, which may include research and development and clinical development costs to support the advancement of the Company’s drug candidates, including the continued growth of the Company’s commercial and medical affairs capabilities, the conduct of clinical trials and preclinical research and development activities; working capital; capital expenditures; repayment of outstanding indebtedness; general and administrative expenses; and other general corporate purposes. The Company may also use net proceeds to fund potential acquisitions of, or investments in, complementary businesses, products, services and technologies. The Company has not entered into any agreements or commitments with respect to any material acquisitions or investments at this time that would be financed with any of the net proceeds from the offering of notes. From time to time, to maintain or increase the Company’s ownership position in its subsidiaries, the Company may make additional investments in or purchase equity in its subsidiaries. These expectations and intentions are subject to change.
The Company expects the purchase price per share of its common stock in the share repurchases to equal the last reported sale price per share of its common stock on the Nasdaq Global Select Market as of the date of the pricing of the notes. The share repurchases could increase (or reduce the size of any decrease in) the market price of the Company’s common stock prior to, concurrently with or shortly after the pricing of the notes, and could result in a higher effective conversion price for the notes.
The notes and the shares of common stock issuable upon conversion of the notes, if any, are not being registered under the Securities Act, or the securities laws of any other jurisdiction. The notes and the shares of common stock issuable upon conversion of the notes, if any, may not be offered or sold in the United States except in transactions exempt from, or not subject to, the registration requirements of the Securities Act and any applicable state securities laws.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.