8-KMaterial AgreementsFinancial EventsSecurities & Listing+1

Expedia Group, Inc. 8-K Report, Material Agreement (Feb 19, 2021)

Filed February 19, 2021For Securities:EXPE

Summary

Expedia Group, Inc. (EXPE) announced the completion of a $1 billion private placement of unsecured 0% convertible senior notes due 2026 on February 19, 2021. The net proceeds, approximately $983 million after expenses, are earmarked for significant debt refinancing activities. Specifically, the funds are intended to finance the redemption of all outstanding 7.000% Senior Notes due 2025 and, if certain conditions are met, a tender offer for a portion of its 6.250% Senior Notes due 2025. Any remaining proceeds will be used for other debt repayment. This move signals a strategic effort by Expedia to manage its capital structure by replacing older, higher-interest debt with newer convertible notes, potentially reducing future interest expenses and offering flexibility. The convertible notes carry a 0% interest rate and are convertible into Expedia's common stock at an initial price of approximately $255.02 per share, representing a substantial premium (around 72.5%) to the stock's closing price on February 16, 2021. This structure suggests the company anticipates its stock price will appreciate, making conversion an attractive option for noteholders. The notes mature in February 2026 and cannot be redeemed by the company until February 2024, providing a defined period before early redemption is possible. The Indenture for these notes does not include restrictive financial covenants regarding dividends, debt incurrence, or share repurchases, offering Expedia considerable operational flexibility.

Key Highlights

  • 1Completed a $1 billion private placement of 0% convertible senior notes due 2026.
  • 2Net proceeds of approximately $983 million raised from the convertible notes offering.
  • 3Funds intended for redemption of 7.000% Senior Notes due 2025 and a potential tender offer for 6.250% Senior Notes due 2025.
  • 4Convertible notes have a 0% coupon rate, with conversion initially priced at a ~72.5% premium to the stock price.
  • 5The notes mature on February 15, 2026, and are not redeemable by the company until February 20, 2024.
  • 6The Indenture does not contain financial covenants related to dividends, debt incurrence, or security repurchases.
  • 7The offering was conducted as a private placement under Section 4(a)(2) and Rule 144A exemptions, targeting qualified institutional buyers.

Frequently Asked Questions

The primary purpose is to refinance existing debt. Expedia Group is using the proceeds to redeem its 7.000% Senior Notes due 2025 and potentially tender for its 6.250% Senior Notes due 2025. This aims to reduce interest expenses and optimize the company's capital structure.

The notes have a principal amount of $1 billion, mature in February 2026, and carry a 0% coupon rate. They are convertible into Expedia's common stock at an initial conversion price of approximately $255.02 per share, which represents a significant premium to the stock price at the time of issuance. The notes are unsecured and guaranteed by certain subsidiary guarantors.

The 0% interest rate means Expedia will not pay cash interest on these notes, reducing immediate cash outflow compared to traditional debt. The conversion premium suggests that Expedia's management is confident in the company's future stock performance and believes the stock price will rise above the conversion price, making it more attractive for noteholders to convert into equity rather than seeking repayment of principal.

No, the Indenture governing these convertible notes does not contain financial covenants that restrict Expedia's ability to pay dividends, incur additional debt, or repurchase its securities. This provides the company with significant financial and operational flexibility.