What was the primary purpose of this 8-K filing?

The primary purpose of this 8-K filing was to report on Salesforce.com's entry into material definitive agreements related to the issuance of $1.15 billion of 0.25% Convertible Senior Notes due 2018 and related hedging and warrant transactions.

What are the key terms of the convertible notes issued?

The notes have a 0.25% annual interest rate, mature on April 1, 2018, and are convertible into Salesforce common stock at an initial rate of 3.7628 shares per $1,000 principal amount (equivalent to an initial conversion price of approximately $265.76 per share). Conversion is subject to certain conditions related to stock price and corporate events.

How does Salesforce plan to manage potential dilution from these convertible notes?

Salesforce entered into convertible note hedge transactions simultaneously with the note issuance. These hedges are designed to offset the dilutive impact of the notes if the stock price increases and the notes are converted. Separately, the company also sold warrants which could have a dilutive effect if the stock price rises significantly above the warrant strike price.

What is the seniority and ranking of these notes within Salesforce's capital structure?

The notes are unsecured and unsubordinated obligations of Salesforce. They rank senior to future indebtedness expressly subordinated to the notes, equal to existing and future unsecured indebtedness not so subordinated, effectively subordinated to secured indebtedness to the extent of the value of securing assets, and structurally subordinated to all existing and future indebtedness and liabilities of Salesforce's subsidiaries.

CRM 8-K: Material Agreements, Financial Events & More

Summary

Salesforce.com, Inc. (CRM) filed an 8-K on March 18, 2013, to report on the issuance of $1.15 billion aggregate principal amount of 0.25% Convertible Senior Notes due 2018. The issuance, which included the exercise of an over-allotment option, was conducted via a private placement to qualified institutional buyers. These notes bear a low coupon rate and mature in 2018, with conversion features and certain conditions for early conversion. Concurrently, Salesforce entered into related convertible note hedge and warrant transactions. The hedge transactions are designed to mitigate potential dilution from the notes, while the warrant transactions, issued at a higher strike price, could have a dilutive effect if the stock price exceeds certain levels. These filings provide insight into the company's capital raising activities and its strategies to manage potential shareholder dilution.

Key Highlights

1Salesforce.com issued $1.15 billion in aggregate principal amount of 0.25% Convertible Senior Notes due 2018.
2The notes were issued through a private placement to qualified institutional buyers under Rule 144A.
3An over-allotment option for an additional $150 million of notes was granted and subsequently exercised.
4The notes have an initial conversion price of approximately $265.76 per share, subject to adjustments.
5Salesforce entered into convertible note hedge transactions to mitigate potential dilution from the notes.
6The company also entered into warrant transactions which could be dilutive under certain stock price conditions.
7The notes are unsecured and subordinated to secured indebtedness and debt of subsidiaries.

Salesforce, Inc. 8-K Report, Material Agreement (Mar 18, 2013)

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