8-KMaterial AgreementsRegulation FDOther Events+1

ATMOS ENERGY CORP 8-K Report, Material Agreement (Dec 3, 2018)

Filed December 3, 2018For Securities:ATO

Summary

Atmos Energy Corporation (ATO) filed an 8-K on December 3, 2018, detailing a significant capital-raising transaction completed around November 28-29, 2018. The company entered into forward sale agreements with Goldman Sachs & Co. LLC and Bank of America, N.A., for the sale of an aggregate of over 2.6 million shares of its common stock. This transaction was part of an underwritten public offering where the company sold approximately 5.4 million shares directly and an additional 1.6 million shares through forward sale agreements initially priced at $91.7731 per share. The forward sale agreements allow Atmos Energy to receive proceeds from these sales, with the actual issuance of shares to the counterparties expected to occur on settlement dates to be determined by Atmos Energy, but no later than March 31, 2020. This structure provides immediate capital to the company while deferring the physical delivery of shares, which could lead to future dilution if physically settled. The agreements also outline provisions for cash or net share settlement under certain conditions and include mechanisms for counterparty acceleration of the agreements under specific circumstances, such as increased borrowing costs or significant corporate events.

Key Highlights

  • 1Atmos Energy entered into forward sale agreements for an aggregate of 2,668,464 shares of common stock with Goldman Sachs and Bank of America.
  • 2These agreements were part of an underwritten public offering totaling 7,008,087 shares of common stock.
  • 3The initial forward sale price was set at $91.7731 per share, subject to certain adjustments.
  • 4Settlement of the forward sale agreements is expected to occur on or before March 31, 2020, at Atmos Energy's discretion.
  • 5Atmos Energy has the option for physical, cash, or net share settlement, with physical settlement potentially leading to future dilution.
  • 6Forward counterparties have rights to accelerate settlement under specified conditions, including increased borrowing costs or corporate events.
  • 7The transaction was registered under the Securities Act via a Form S-3 registration statement.

Frequently Asked Questions

The forward sale agreements are a mechanism for Atmos Energy to raise capital by selling shares of its common stock. The company enters into these agreements with financial institutions (forward counterparties) who then sell the shares to underwriters. Atmos Energy receives proceeds from this sale but defers the actual issuance of shares to the counterparties until a future settlement date, which allows for immediate funding while managing the timing of potential share dilution.

The settlement date for these forward sale agreements is at Atmos Energy's discretion but is expected to occur on or prior to March 31, 2020. On the settlement date, Atmos Energy will physically issue shares to the forward counterparties at a price that may be adjusted from the initial $91.7731 per share.

Yes, physical settlement of the forward sale agreements will result in the issuance of new shares, which will dilute existing shareholders' ownership percentages and earnings per share. Atmos Energy can also elect cash or net share settlement under certain conditions, which may also involve share repurchases or deliveries that could impact the stock price and ownership.

The forward counterparties have the right to accelerate settlement under various conditions, such as if they face materially increased costs or inability to hedge their positions, if they cannot borrow the necessary shares at an acceptable cost, if certain ownership thresholds are breached, or if specific corporate events like significant dividend declarations, mergers, tender offers, or delisting occur. These provisions protect the counterparties from undue risk.