8-KSecurities & Listing

Liberty Media Corp 8-K Report, Unregistered Securities Sale (Jun 28, 2016)

Filed June 28, 2016For Securities:FWONKFWONAFWONB

Summary

This 8-K filing by Liberty Media Corporation (FWONK) on June 28, 2016, details amendments to its previously issued 1.375% Cash Convertible Senior Notes due 2023, specifically related to privately negotiated convertible note hedge and warrant transactions. The core of the disclosure revolves around a reclassification of Liberty Media's common stock into a basket of tracking stocks (LSXMA, BATRA, LMCA). This reclassification necessitated amendments to the existing hedge and warrant agreements with Deutsche Bank, JPMorgan Chase, and Wells Fargo, the option counterparties. The amendments adjust the number of underlying shares for both the bond hedge and warrant transactions to align with the new basket of tracking stocks. The bond hedge transactions are designed to offset potential cash payments exceeding the principal amount of the notes upon conversion, should the average price of the underlying securities basket exceed a strike price of $47.4251. Conversely, the warrant transactions, which are European-style options, may have a dilutive effect if their settlement price exceeds the adjusted strike price of $61.16 and are settled in shares.

Key Highlights

  • 1Amendments to 2013 convertible note hedge and warrant transactions in response to Liberty Media's stock reclassification.
  • 2The reclassification resulted in the creation of a 'Securities Basket' for convertible note conversion, comprising LSXMA, BATRA, and LMCA tracking stocks.
  • 3The bond hedge transactions' underlying shares were adjusted to cover LSXMA, BATRA, and LMCA, reflecting the new Securities Basket.
  • 4The bond hedge strike price is $47.4251, intended to mitigate excess cash payments upon note conversion.
  • 5The warrant transactions' underlying shares were also adjusted for the Securities Basket, with an adjusted strike price of $61.16.
  • 6Warrant transactions may be dilutive if settled in shares and the settlement price exceeds the strike price.
  • 7Both amended hedge and warrant transactions are intended to be exempt from registration under Section 4(a)(2) of the Securities Act of 1933.

Frequently Asked Questions

The Amended Bond Hedge Transactions are designed to offset potential cash payments Liberty Media might have to make in excess of the principal amount of its 1.375% Cash Convertible Senior Notes due 2023 if the conversion price is higher than the strike price. The Amended Warrant Transactions, on the other hand, could potentially have a dilutive effect on the underlying tracking stocks if they are settled in shares and the settlement price is above their strike price.

The reclassification of Liberty Media's common stock into a basket of tracking stocks (LSXMA, BATRA, and LMCA) required amendments to the existing bond hedge and warrant agreements. The number of underlying shares covered by these transactions was adjusted to reflect the composition of the new 'Securities Basket' into which the convertible notes are now convertible.

No, the Amended Bond Hedge Transactions and Amended Warrant Transactions are separate, privately negotiated agreements between Liberty Media and the option counterparties (Deutsche Bank, JPMorgan Chase, and Wells Fargo). They are not part of the terms of the Notes and do not affect the rights of the noteholders.

Yes, the warrants are European options and may have a dilutive effect on the shares comprising the underlying Securities Basket if they are settled in shares and the settlement price of the warrants exceeds their strike price of $61.16.