Summary
NVIDIA Corporation (NVDA) filed an 8-K on September 16, 2016, to report on the issuance of $2.0 billion in unsecured notes. This debt offering consisted of $1.0 billion in 2.20% notes due 2021 and $1.0 billion in 3.20% notes due 2026. The net proceeds, approximately $1.98 billion after expenses, are earmarked for pre-funding the repayment of convertible notes due 2018 and for general corporate purposes, including potential dividend payments or share repurchases. The new notes are unsecured senior obligations, ranking equally with existing and future unsecured and unsubordinated debt, but are structurally subordinated to subsidiary liabilities and effectively subordinated to any secured indebtedness. The indenture governing these notes includes covenants that limit NVIDIA's ability to create liens, enter into sale and leaseback transactions, or undergo significant asset sales, with certain exceptions. Notably, the notes include a change of control provision requiring a repurchase offer at 101% of the principal amount plus accrued interest if a change of control occurs and the notes are downgraded below investment grade by both Moody's and S&P.
Key Highlights
- 1NVIDIA issued $2.0 billion in unsecured notes, comprising $1.0 billion of 2.20% notes due 2021 and $1.0 billion of 3.20% notes due 2026.
- 2The offering generated approximately $1.98 billion in net proceeds after underwriting discounts and expenses.
- 3Proceeds are intended to pre-fund the repayment of 2018 convertible notes and for general corporate purposes (dividends, share repurchases).
- 4The notes are senior unsecured obligations, pari passu with existing unsecured and unsubordinated debt.
- 5The notes are structurally subordinated to subsidiary liabilities and effectively subordinated to secured debt.
- 6The indenture contains covenants restricting liens, sale-leasebacks, and substantial asset disposals, subject to exceptions.
- 7A change of control provision requires a 101% repurchase offer if a change of control occurs and the notes are downgraded below investment grade by Moody's and S&P.