ITEM 3 - APPROVAL OF THE REMOVAL OF COMMON STOCK ISSUANCE RESTRICTIONS OF THE COMPANY UPON EXERCISE OF WARRANTS
On December 18, 2017 (the “Closing Date”), the Company issued and sold approximately $143.8 million aggregate principal amount of 4.50% Convertible Senior Notes due 2023 (the “Notes”). The Company used approximately $89.6 million of the net proceeds from the offering of the Notes to repay a portion of the term loan indebtedness outstanding as of the Closing Date under our then-existing amended and restated revolving credit and term loan agreement dated November 22, 2010. The issuance of the Notes, together with the other financings described on page 29 of this proxy statement, resulted in aggregate proceeds of $723.8 million funded during fiscal year 2018 and liquidity on March 31, 2018 of $380.2 million.
In connection with the offering of the Notes, the Company also entered into convertible note hedge transactions (the “Note Hedges”) and warrant transactions (the “Warrants”) with certain counterparties (the “Option Counterparties”). The Company entered into the Note Hedges and the Warrants in order to reduce potential equity ownership dilution and/or offset potential cash payments in excess of the principal amount of the Notes, in either case, in the event that the market price of the common stock of the Company (the “Common Stock”), as measured under the terms of the Note Hedges, is greater than the strike price of the Note Hedges, which initially corresponded to the initial conversion price of the Notes of approximately $15.64 per share of Common Stock (subject to adjustment). If, however, the market price per share of Common Stock, as measured under the terms of the Warrants exceeds the strike price of the Warrants, there would nevertheless be dilution to the extent that such market price, as measured over the applicable valuation period at the maturity of the Warrants exceeds the strike price of the Warrants, which initially was approximately $20.02 per share of Common Stock (subject to adjustment). The Warrants are scheduled to expire over an 80 trading day exercise period commencing on September 1, 2023, subject to early settlement upon the occurrence of certain extraordinary events. If the market price per share of Common Stock does not exceed the applicable strike price of the Warrants during such 80 trading day exercise period, each as measured under the terms of the Warrants, and no such early settlement events occur, the Warrants would not be exercised and we would not be required to deliver shares of Common Stock under the Warrants.
Exercise of the Warrants, however, could result in the issuance of 20% or more of the Common Stock outstanding as of the Closing Date. Because NYSE rules state that, in certain circumstances, an issuer is required to obtain stockholder approval prior to the issuance of common stock in any transaction or series of transactions if (i) the shares of common stock will have upon issuance voting power equal to 20% or more of the voting power outstanding before the issuance of the common stock or (ii) the number of shares of common stock to be issued will upon issuance equal 20% or more of the number of shares of common stock outstanding before the issuance of the common stock, the Warrants currently limit the issuance of Common Stock to 19.9% of the Common Stock outstanding as of the Closing Date, which is an amount equal to 7,037,718 shares of the Common Stock (the “Warrant Cap”).
This Item 3 seeks stockholder approval to remove the Warrant Cap, which would impact the Company to the extent the exercise of the Warrants results in the issuance of 20% or more of the Common Stock outstanding as of the Closing Date. Approval of Item 3 will allow the Company to issue and deliver 20% or more of the Common Stock outstanding as of the Closing Date upon the exercise of the Warrants.
The Board of Directors recommends a vote FOR Item 3.
Questions and Answers on Item 3
The following questions and answers briefly address some questions you may have regarding Item 3. These questions and answers may not address all questions that may be important to you as a stockholder. For more detail, see “—Summary of the Warrants” and “—NYSE Stockholder Approval Requirements” below.
How many shares of Common Stock are potentially issuable before the Warrant Cap is triggered?
The Warrant Cap is 19.9% of the Common Stock outstanding as of the Closing Date. The Warrant Cap limits the shares of Common Stock potentially issuable upon exercise of the Warrants to 7,037,718 shares.
Is the Company required to issue shares of Common Stock upon exercise of the Warrants?
Yes. Upon exercise of the Warrants, the Company will be required to issue a certain number of shares of Common Stock. In the event of an early termination of the Warrants, the Company may elect to deliver cash in lieu of any shares of Common Stock it would otherwise be required to deliver, subject to certain conditions.
How many shares of Common Stock are potentially issuable if the Warrant Cap is removed?
If the Warrant Cap is removed, the maximum number of shares of Common Stock potentially issuable in respect of the Warrants is 13,788,960 shares of Common Stock.
BRISTOW GROUP INC. – 2018 Proxy Statement – 59