8-KFinancial EventsSecurities & ListingRegulation FD+1

Liberty Media Corp 8-K Report, Financial Obligation (Oct 17, 2013)

Filed October 17, 2013For Securities:FWONKFWONAFWONB

Summary

Liberty Media Corporation (FWONK) filed an 8-K on October 17, 2013, detailing the closing of its $1 billion offering of 1.375% cash convertible senior notes due 2023. These notes, which are convertible into cash based on the volume-weighted average price of Liberty Media's common stock, bear interest at a low rate of 1.375% and mature in 10 years. The proceeds are earmarked for the costs associated with hedging transactions and to reduce outstanding margin loans, with any remainder for general corporate purposes. In conjunction with this offering, Liberty Media also executed hedging strategies, including bond hedge transactions to offset potential cash payments above the principal amount upon conversion and warrant transactions that could be dilutive if the stock price exceeds the warrant strike price. These hedging instruments are separate from the notes themselves and do not affect noteholder rights. The company also announced its third-quarter earnings release date for November 5, 2013.

Key Highlights

  • 1Liberty Media closed a $1 billion offering of 1.375% cash convertible senior notes due 2023 on October 17, 2013.
  • 2Notes are convertible into cash, not stock, based on a volume-weighted average price calculation.
  • 3Proceeds will be used to fund hedging transactions and pay down margin loans, with remaining funds for general corporate purposes.
  • 4The notes mature on October 15, 2023, with semi-annual interest payments.
  • 5Initial conversion price is approximately $178.95 per share, representing an initial conversion rate of 5.5882 shares per $1,000 principal.
  • 6Liberty Media entered into "bond hedge" transactions to mitigate potential cash outflows above the principal amount upon conversion.
  • 7Concurrently, "warrant" transactions were entered into, which could potentially be dilutive to common stock if prices rise significantly above the strike price.

Frequently Asked Questions

Liberty Media issued $1 billion in 1.375% cash convertible senior notes due October 15, 2023. Interest is paid semi-annually. Upon conversion, holders will receive cash based on the volume-weighted average price of Liberty Media's common stock over a 40-day period, rather than shares. The initial conversion price is approximately $178.95.

The proceeds are intended to cover the costs of associated cash convertible note hedge transactions and to reduce outstanding margin loans. Any remaining net proceeds will be used for general corporate purposes.

The "bond hedge" transactions are designed to offset potential cash payments Liberty Media might have to make above the principal amount of the notes if the stock price is high at the time of conversion. The "warrant" transactions, however, could potentially be dilutive to common stockholders if the stock price rises significantly above the warrant strike price ($255.64) and Liberty Media settles these with shares. Liberty received approximately $170 million from selling these warrants, resulting in a net cost of about $129 million for both hedging strategies.

Yes, in the event of a "fundamental change" (as defined in the indenture), noteholders have the option to require Liberty Media to repurchase their notes for cash at 100% of the principal amount, plus accrued and unpaid interest.