8-KFinancial EventsOther EventsExhibits & Filings

STARBUCKS CORP 8-K Report, Financial Obligation (May 16, 2016)

Filed May 16, 2016For Securities:SBUX

Summary

Starbucks Corporation (SBUX) filed an 8-K on May 16, 2016, to report the completion of a public offering of senior unsecured notes totaling $750 million. This issuance includes $250 million of 2.100% Senior Notes due 2021 and $500 million of 2.450% Senior Notes due 2026. These notes are intended to bolster the company's financial flexibility, with terms that allow for redemption under specific conditions. The issuance indicates a strategic move by Starbucks to manage its capital structure and fund future growth or operational needs. Investors should note the senior unsecured nature of these obligations and their subordination to subsidiary-level debt, as well as the provisions for potential repurchase upon a change of control event coupled with a credit rating downgrade.

Key Highlights

  • 1Completion of a $750 million public offering of senior unsecured notes.
  • 2Issuance comprises $250 million of 2.100% Senior Notes due 2021.
  • 3Issuance comprises $500 million of 2.450% Senior Notes due 2026.
  • 4Notes are issued under an existing Indenture framework, with supplemental indentures for each series.
  • 5Starbucks retains the right to redeem notes prior to maturity under specified conditions, including a 'make whole' premium.
  • 6Notes may be subject to repurchase at 101% of principal upon a change of control triggering event.
  • 7The notes rank equally with other senior unsecured indebtedness but are effectively subordinated to subsidiary liabilities.

Frequently Asked Questions

The primary purpose of this 8-K filing was to report the completion of Starbucks' public offering of $750 million in senior unsecured notes, consisting of two tranches: $250 million in notes due 2021 and $500 million in notes due 2026.

The 2.100% Senior Notes due 2021 mature on February 4, 2021, and carry semi-annual interest payments. The 2.450% Senior Notes due 2026 mature on June 15, 2026, also with semi-annual interest payments. Both note series are senior unsecured obligations and can be redeemed by Starbucks under specified conditions, including a 'make whole' premium or at par value closer to maturity.

In the event of a 'change of control triggering event,' which requires both a change of control and a below investment grade rating from Moody's and S&P, Starbucks is obligated to offer to repurchase these notes at 101% of their principal amount, plus accrued interest. This provides some protection to noteholders in such scenarios.

The new notes are Starbucks' senior unsecured obligations, ranking equally with all other existing and future senior unsecured indebtedness. However, they are effectively subordinated to any existing or future indebtedness or liabilities of Starbucks' subsidiaries, including trade payables. This means that in a liquidation scenario, subsidiary creditors would be paid before holders of these notes.