8-KFinancial EventsOther EventsExhibits & Filings

STARBUCKS CORP 8-K Report, Financial Obligation (Nov 22, 2017)

Filed November 22, 2017For Securities:SBUX

Summary

Starbucks Corporation (SBUX) filed an 8-K on November 22, 2017, to report the completion of a public offering of senior notes. The company issued $500 million in 2.200% Senior Notes due 2020 and $500 million in 3.750% Senior Notes due 2047, totaling $1 billion in debt. These notes are senior unsecured obligations of Starbucks and rank equally with other senior unsecured indebtedness, but are effectively subordinated to any debt of its subsidiaries. This financing activity is significant for investors as it indicates the company's strategy to manage its capital structure and potentially fund future growth or operational needs. The issuance includes specific terms regarding interest payments, maturity dates, redemption options, and a change of control provision that would trigger a repurchase offer. Investors should note the specific coupon rates and maturity profiles of these new debt instruments when assessing Starbucks' overall financial leverage and risk.

Key Highlights

  • 1Starbucks completed a public offering of $1 billion in senior notes.
  • 2The offering consisted of $500 million in 2.200% Senior Notes due 2020.
  • 3The offering also included $500 million in 3.750% Senior Notes due 2047.
  • 4The notes are senior unsecured obligations of Starbucks.
  • 5The notes rank equally with other senior unsecured indebtedness but are subordinated to subsidiary obligations.
  • 6A 'change of control' event, coupled with a below investment grade rating, triggers an offer to repurchase the notes at 101% of principal.
  • 7The company is using a new Indenture, supplemented by a Second Supplemental Indenture, to govern these notes.

Frequently Asked Questions

This 8-K filing reports on Starbucks' completion of a public offering of $1 billion in senior unsecured notes, divided into two tranches: $500 million due in 2020 and $500 million due in 2047. It outlines the terms and conditions of these new debt issuances.

The 2.200% Senior Notes due 2020 mature on November 22, 2020, with interest paid semi-annually. The 3.750% Senior Notes due 2047 mature on December 1, 2047, with interest paid semi-annually. Both series are subject to redemption and have a provision requiring a repurchase offer upon a change of control triggering event.

The issuance increases Starbucks' total debt by $1 billion. As senior unsecured obligations, these notes rank pari passu with existing senior unsecured debt but are effectively subordinated to any obligations of Starbucks' subsidiaries. Investors should consider this increased leverage when evaluating the company's financial health and risk profile.

The 'change of control' provision requires Starbucks to offer to repurchase the notes at 101% of the principal amount, plus accrued interest, if a change of control event occurs AND the notes are subsequently rated below investment grade by Moody's and S&P. This provides a layer of protection for noteholders in specific adverse scenarios.