Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 8.01 of this Current Report on Form 8-K
regarding the Convertible Notes (as under that Item 8.01) is hereby incorporated
by reference into this Item 2.03.
Item 7.01. Regulation FD Disclosure.
On January 6, 2021, Summit Hotel Properties, Inc. (the "Company") issued a press
release announcing the launch of the Convertible Notes Offering (as defined
below).
On January 8, 2021, the Company issued a press release announcing the pricing of
the Convertible Notes Offering.
On January 12, 2021, the Company issued a press release announcing the closing
of the Convertible Notes Offering.
Copies of these press releases are furnished as Exhibits 99.1, 99.2 and 99.3,
respectively, to this Current Report on Form 8-K and are hereby incorporated by
reference into this Item 7.01.
Item 8.01. Other Events.
Convertible Senior Notes Offering
On January 7, 2021, the Company and Summit Hotel OP, LP (the "Operating
Partnership" entered into an underwriting agreement (the "Underwriting
Agreement") with the several underwriters named on Schedule I therein (the
"Underwriters"), for whom BofA Securities, Inc. and Deutsche Bank Securities
Inc. acted as representatives, pursuant to which the Company agreed to offer and
sell $287.5 million aggregate principal amount of the Company's 1.50%
convertible senior notes due 2026 (such notes, the "Convertible Notes," and such
offering, the "Convertible Notes Offering"). In the Underwriting Agreement, the
Company and the Operating Partnership made certain customary representations,
warranties and covenants and agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. The closing of the Convertible Notes Offering occurred on January 12,
2021.
The net proceeds from the Convertible Notes Offering, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company (including net proceeds from the full exercise by the
underwriters of their over-allotment option to purchase additional Convertible
Notes), were approximately $279.8 million.
This description of the material terms of the Underwriting Agreement is
qualified in its entirety by reference to the Underwriting Agreement, a copy of
which is filed as Exhibit 1.1 to this Current Report on Form 8-K and is hereby
incorporated by reference into this Item 8.01. For a more detailed description
of the Underwriting Agreement, see the disclosure under the caption
"Underwriting" contained in the Prospectus Supplement, which disclosure is
hereby incorporated by reference into this Item 8.01.
In connection with the filing of the Underwriting Agreement, the Company is
filing with this Current Report on Form 8-K the opinion of its counsel, Venable
LLP, as Exhibit 5.1(a) and the opinion of its counsel, Hunton Andrews Kurth LLP,
as Exhibit 5.1(b).
Convertible Senior Notes
The Convertible Notes were issued on January 12, 2021 pursuant to an indenture,
dated as of January 12, 2021 (the "Base Indenture"), between the Company and The
Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), as
supplemented by the First Supplemental Indenture, dated as of January 12, 2021
(the "Supplemental Indenture" and, together with the Base Indenture, the
"Indenture"), between the Company and the Trustee.
The Convertible Notes have been registered on the Company's shelf registration
statement on Form S-3 (File No. 333-231156), which became effective upon filing
with the United States Securities and Exchange Commission (the "SEC") on May 1,
2019, as amended by Post-Effective Amendment No. 1, which became effective upon
filing with the SEC on January 6, 2021, including the prospectus supplement
filed by the Company with the SEC pursuant to Rule 424(b) under the Securities
Act, dated January 7, 2021, to the prospectus contained in the registration
statement (the "Prospectus Supplement").
The Convertible Notes bear interest at a rate of 1.50% per year, payable
semi-annually in arrears on February 15 and August 15 of each year, beginning on
August 15, 2021. The Convertible Notes are the general unsecured obligations of
the Company and rank equal in right of payment with the other existing and
future senior unsecured indebtedness of the Company and senior in right of
payment to any indebtedness of the Company that is contractually subordinated to
the Convertible Notes. The Convertible Notes, however, are effectively
subordinated in right of payment to the existing and future secured indebtedness
of the Company to the extent of the value of the collateral securing such
indebtedness, and structurally subordinated to the claims of the Company's
subsidiaries' creditors, including trade creditors.
The Convertible Notes will mature on February 15, 2026 (the "Maturity Date"),
unless earlier converted, purchased or redeemed. Prior to February 15, 2026, the
Convertible Notes will be convertible only upon certain circumstances and during
certain periods as described in the Prospectus Supplement. Prior to August 15,
2025, holders may convert any of their Convertible Notes into shares of the
Company's common stock, $0.01 par value per share (the "Common Stock"), at the
applicable conversion rate at any time prior to the close of business on the
second scheduled trading day prior to the Maturity Date, unless the Convertible
Notes have been previously purchased or redeemed by the Company.
The initial conversion rate of the Convertible Notes is 83.4028 shares of Common
Stock per $1,000 principal amount of Convertible Notes, which is equivalent to
an initial conversion price of approximately $11.99 per share of Common Stock.
The conversion rate is subject to adjustment in certain circumstances.
Prior to February 20, 2024, the Company may not redeem the Convertible Notes.
The Company may redeem for cash all or a portion of the Convertible Notes, at
its option, on or after February 20, 2024 if the last reported sale price of the
Common Stock has been at least 130% of the conversion price then in effect for
at least 20 trading days (whether or not consecutive), including the trading day
immediately preceding the date on which the Company provides a notice of
redemption, during any 30 consecutive trading day period ending on, and
including, the trading day immediately preceding the date on which the Company
provides notice of redemption. The redemption price will be equal to 100% of the
principal amount of the Convertible Notes to be redeemed, plus accrued and
unpaid interest to, but excluding, the redemption date.
Upon the occurrence of a fundamental change (as defined in the Indenture)
involving the Company, holders of the Convertible Notes may require the Company
to repurchase all or a portion of their Convertible Notes for cash at a price
equal to 100% of the principal amount of the Convertible Notes to be purchased,
plus accrued and unpaid interest to, but excluding, the fundamental change
purchase date.
If an event of default (as defined in the Indenture) occurs and is continuing,
the Trustee by notice to the Company, or the holders of at least 25% in
aggregate principal amount of the Convertible Notes then outstanding by notice
to the Company and the Trustee, may declare 100% of the principal of and accrued
and unpaid interest on all the Convertible Notes to be due and payable. In the
case of an event of default arising out of certain bankruptcy or insolvency
events (as set forth in the Indenture), 100% of the principal of and accrued and
unpaid interest on the Convertible Notes will automatically become due and
payable.
Capped Call Transactions
On January 7, 2021, in connection with the pricing of the Convertible Notes, and
on January 8, 2021, in connection with the full exercise by the Underwriters of
their option to purchase additional Convertible Notes pursuant to the
Underwriting Agreement, the Company entered into privately negotiated capped
call transactions (the "Capped Call Transactions") with certain of the
underwriters or their respective affiliates and another financial institution
(the "Capped Call Counterparties"). The Capped Call Transactions initially
cover, subject to anti-dilution adjustments substantially similar to those
applicable to the Convertible Notes, the number of shares of Common Stock
underlying the Convertible Notes. The Capped Call Transactions are generally
expected to reduce the potential dilution to holders of shares of Common Stock
upon conversion of the Convertible Notes and/or offset the potential cash
payments that the Company could be required to make in excess of the principal
amount of any converted Convertible Notes upon conversion thereof, with such
reduction and/or offset subject to a cap.
The cap price of the Capped Call Transactions was initially approximately
$15.26, which represents a premium of 75.0% over the last reported sale price of
the Common Stock on the New York Stock Exchange on January 7, 2021, and is
subject to certain adjustments under the terms of the Capped Call transactions.
The Capped Call Transactions are separate transactions entered into by the
Company with the Capped Call Counterparties, are not part of the terms of the
Convertible Notes and will not change any holder's rights under the Convertible
Notes. Holders of the Convertible Notes will not have any rights with respect to
the Capped Call Transactions.
The Company used approximately $21.1 million of the net proceeds from the
offering of the Convertible Notes to pay the cost of the Capped Call
Transactions.
The foregoing descriptions of the material terms of the Base Indenture, the
Supplemental Indenture, the Convertible Notes and the Capped Call Transactions
do not purport to be complete and are qualified in their entirety by reference
to the Base Indenture, the Supplemental Indenture, the form of the Convertible
Notes and the form of the confirmation for the Capped Call Transactions, copies
of which are filed as Exhibits 4.1, 4.2, 4.3 and 99.4, respectively, and are
hereby incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit Description
No.
1.1 Underwriting Agreement, dated as of January 7, 2021, by and among the
Company and the Operating Partnership and BofA Securities, Inc. and
Deutsche Bank Securities Inc., as representatives of the several
underwriters listed on Schedule I attached thereto.
4.1 Indenture, dated January 12, 2021, between the Company and The Bank of
New York Mellon Trust Company, N.A., as trustee.
4.2 First Supplemental Indenture, dated January 12, 2021, between the
Company and The Bank of New York Mellon Trust Company, N.A., as trustee.
4.3 Form of 1.50% Convertible Senior Notes Due 2026 of the Company
(attached as Exhibit A to the First Supplemental Indenture filed as
Exhibit 4.2).
5.1(a) Opinion of Venable LLP regarding the legality of the Convertible
Notes.
5.1(b) Opinion of Hunton Andrews Kurth LLP regarding the legality of the
Convertible Notes.
23.1 Consent of Venable LLP (included in Exhibit 5.1(a)).
23.2 Consent of Hunton Andrews Kurth LLP (included in Exhibit 5.1(b)).
99.1 Press release, issued January 6, 2021, regarding the launch of the
Notes offering.
99.2 Press release, issued January 8, 2021, regarding the pricing of the
Notes offering.
99.3 Press release, issued January 12, 2021, regarding the closing of the
Notes offering.
99.4 Form of Capped Call Transaction Confirmation.
104 Cover Page Interactive Data File - the cover page XBRL tags are embedded
within the Inline XBRL document
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