8-KMaterial AgreementsOther EventsExhibits & Filings

ENTERGY CORP /DE/ 8-K Report, Material Agreement (Jun 11, 2018)

Filed June 11, 2018For Securities:ETR

Summary

Entergy Corp. (ETR) filed an 8-K on June 11, 2018, disclosing material definitive agreements related to a significant equity offering. The company entered into forward sale agreements with Morgan Stanley, Goldman Sachs, and JPMorgan Chase for an aggregate of 15,282,392 shares of common stock. These agreements allow Entergy to defer the issuance of these shares until settlement dates chosen by the company, with a deadline of June 7, 2019. The initial forward sale price was set at $74.45 per share, subject to daily adjustments based on interest rates and specific dates. This structure effectively allows Entergy to receive proceeds from the sale of these shares upfront, similar to a traditional offering, while deferring the actual issuance of new stock. The company retains flexibility in how it settles these agreements, with options for physical settlement (issuing new shares), net share settlement, or cash settlement. The filing also details specific circumstances under which the forward purchasers could accelerate settlement, which could impact the company's obligations and potentially lead to dilution or cash outflows.

Key Highlights

  • 1Entergy entered into forward sale agreements for approximately 15.3 million shares of common stock.
  • 2The agreements were made with major financial institutions: Morgan Stanley, Goldman Sachs, and JPMorgan Chase.
  • 3Settlement of these agreements is flexible, with settlement dates to be determined by Entergy on or before June 7, 2019.
  • 4The initial forward sale price is $74.45 per share, with provisions for adjustments.
  • 5Entergy has options for physical settlement (issuing new shares), net share settlement, or cash settlement.
  • 6The filing outlines specific conditions under which forward purchasers can accelerate settlement.
  • 7This transaction involved the upfront sale of borrowed shares to underwriters, with Entergy deferring the actual issuance of new shares.

Frequently Asked Questions

The forward sale agreements allow Entergy to raise capital by effectively selling shares at a predetermined price, with the actual issuance of new shares deferred until a future date selected by the company (up to June 7, 2019). This provides Entergy with upfront cash while offering flexibility in settlement.

If Entergy chooses physical settlement, it will issue new shares, which could lead to dilution of earnings per share and ownership for existing shareholders. The exact impact depends on the settlement method chosen and the market price of the stock at the time of settlement.

The forward sale price is subject to daily adjustments based on interest rates. If Entergy opts for cash settlement or net share settlement and the market price of the stock at the time of repurchase is above the forward sale price, Entergy may have to pay cash. Conversely, if the market price is below the forward sale price, the forward purchaser may pay Entergy cash. The specific financial outcome also depends on the settlement method chosen.

The forward purchasers have the right to accelerate settlement under several conditions, including if they are unable to borrow shares at an agreed rate, if Entergy declares certain types of dividends or distributions, if certain ownership thresholds are exceeded by the forward purchaser, or if an event occurs that would lead to an 'extraordinary event' (like a merger or delisting) or other events of default.