8-KMaterial AgreementsFinancial EventsSecurities & Listing+1

Affirm Holdings, Inc. 8-K Report, Material Agreement (Nov 23, 2021)

Filed November 23, 2021For Securities:AFRM

Summary

Affirm Holdings, Inc. announced on November 23, 2021, the successful issuance and sale of $1.725 billion aggregate principal amount of 0% Convertible Senior Notes due 2026. This issuance, which included the full exercise of an over-allotment option, was made to qualified institutional buyers via a private placement. The company entered into an Indenture with Wilmington Trust, National Association, as trustee, to govern the terms of these notes. These notes are general senior unsecured obligations and will mature on November 15, 2026, unless earlier repurchased, redeemed, or converted. A key feature for investors is the conversion option, allowing holders to convert the notes into Affirm's Class A common stock under specific conditions, including stock price thresholds and corporate events, or at their option after August 15, 2026. The initial conversion rate is set at 4.6371 shares per $1,000 principal amount, implying a conversion price of approximately $215.65 per share.

Key Highlights

  • 1Affirm raised $1.725 billion through the issuance of 0% Convertible Senior Notes due 2026.
  • 2The offering included the full exercise of the initial purchasers' option to purchase an additional $225 million in notes.
  • 3The notes are unsecured, general senior obligations maturing on November 15, 2026.
  • 4Holders have the right to convert notes into Class A common stock under specific conditions related to stock price performance or corporate events.
  • 5The initial conversion price is approximately $215.65 per share of Class A common stock.
  • 6The issuance was conducted as a private placement to qualified institutional buyers.
  • 7The company will have the option to pay cash and/or shares of Class A common stock upon conversion.

Frequently Asked Questions

While not explicitly stated in this 8-K, companies typically issue convertible notes to raise capital for general corporate purposes, including funding growth initiatives, potential acquisitions, or strengthening their balance sheet, often with a lower interest cost compared to traditional debt.

A 0% interest rate means Affirm is not paying periodic cash interest on the principal amount of the notes. Instead, the investors' return is primarily derived from the potential appreciation of Affirm's Class A common stock, as they can convert the notes into equity if the stock price performs well, as outlined in the conversion provisions.

Investors can convert their notes into Affirm's Class A common stock if the stock price meets certain performance hurdles (e.g., a sustained price above 130% of the conversion price) or if Affirm calls the notes for redemption, or upon specific corporate events. They also have the option to convert after August 15, 2026. The initial conversion rate is 4.6371 shares per $1,000 principal, implying a conversion price of about $215.65 per share.

The notes are general senior unsecured obligations of Affirm, meaning they rank equally with other unsubordinated debt but are subordinate to secured debt to the extent of the collateral value. They are also structurally subordinated to the liabilities of Affirm's subsidiaries, meaning the creditors of the subsidiaries would be paid before any funds could be distributed to the parent company's noteholders in a liquidation scenario.