Cracker Barrel Announces Pricing Of $275 Million Private Offering Of Convertible Senior Notes Due 2026
LEBANON, TN (StLouisRestaurantReview) Cracker Barrel Old Country Store, Inc. (“Cracker Barrel” or the “Company”) (Nasdaq: CBRL), today announced the pricing of its offering of $275 million aggregate principal amount of 0.625% convertible senior notes due 2026 (the “notes”) in a private offering only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). Cracker Barrel also granted the initial purchasers of the notes an option to purchase for settlement within a period of 13 days from, and including, the date notes are first issued, up to an additional $25 million aggregate principal amount of notes in the private placement. The issuance and sale of the notes are scheduled to settle on or about June 18, 2021, subject to customary closing conditions.
The notes will be senior, unsecured obligations of Cracker Barrel and will accrue interest at a rate of 0.625% per annum, payable semi-annually in arrears on June 15 and December 15 of each year beginning on December 15, 2021. The notes will mature on June 15, 2026, unless earlier repurchased, redeemed, or converted. The notes will be convertible by the noteholders prior to the close of business on the business day immediately preceding December 15, 2025, only under certain circumstances and during certain periods, and irrespective of those circumstances will be convertible by the noteholders on or after December 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date. The initial conversion rate will be 5.3153 shares of Cracker Barrel’s common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $188.14 per share of Cracker Barrel’s common stock, which represents a premium of 25% over the last reported sale of $150.51 per share of Cracker Barrel’s common stock on June 15, 2021), subject to adjustment in certain circumstances. Upon conversion, the notes may be settled, at Cracker Barrel’s election, in cash and, if applicable, shares of Cracker Barrel’s common stock.
The notes will also be redeemable, in whole or in part, for cash at Cracker Barrel’s option at any time on or after June 15, 2024, and on or before the 25th scheduled trading day immediately before the maturity date, in certain circumstances at a redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of Cracker Barrel’s common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date Cracker Barrel sends the related redemption notice; and (2) the trading day immediately before the date it sends such notice. In addition, if a “fundamental change” (as defined in the indenture for the notes) occurs, then, subject to a limited exception, noteholders may require Cracker Barrel to repurchase their notes for cash for a repurchase price equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding the applicable repurchase date.
Cracker Barrel estimates that the net proceeds from the offering will be approximately $266.8 million (or approximately $291.1 million if the initial purchasers fully exercise their option to purchase additional notes) after deducting the initial purchaser’s discounts and commissions and estimated offering expenses. Cracker Barrel intends to use approximately $27.8 million of the net proceeds to fund the cost of entering into the convertible note hedge transactions described below (after such cost is partially offset by the proceeds from entering into the warrant transactions described below) and the remaining proceeds for the repayment of a portion of the indebtedness outstanding under Cracker Barrel’s revolving credit facility and general corporate purposes. In addition, Cracker Barrel expects to repurchase 232,543 shares of its common stock with an aggregate value of approximately $35 million through privately negotiated transactions effected through one of the initial purchasers or its affiliates as Cracker Barrel’s agent. These concurrent repurchases of shares of Cracker Barrel’s common stock may result in the common stock trading at prices that are higher than would be the case in the absence of these repurchases.
If the initial purchasers exercise their option to purchase additional notes, then Cracker Barrel intends to use a portion of the additional net proceeds to fund the cost of entering into additional convertible note hedge transactions as described below (after such cost is partially offset by the proceeds from entering into the additional warrant transactions described below).
In connection with the pricing of the notes, Cracker Barrel entered into privately negotiated convertible note hedge transactions with one or more of the initial purchasers or their respective affiliates and/or other financial institutions (the “hedge counterparties”). These transactions will cover, subject to anti-dilution adjustments substantially similar to those applicable to the notes, the aggregate number of shares of Cracker Barrel’s common stock that will initially underlie the notes and are generally expected to reduce or offset the potential dilution to Cracker Barrel’s common stock, and/or offset any cash payments in excess of the principal amount due, as the case may be, upon conversion of the notes.
Cracker Barrel also entered into separate, privately-negotiated warrant transactions with the hedge counterparties relating to the same number of shares of Cracker Barrel’s common stock, subject to customary anti-dilution adjustments, pursuant to which Cracker Barrel will sell warrants to the hedge counterparties. The warrants could have a dilutive effect on Cracker Barrel’s common stock to the extent that the market value per share of Cracker Barrel’s common stock exceeds the strike price of those warrants. The strike price of the warrants will initially be $263.3925 per share, which represents a premium of 75% over the per share closing price of Cracker Barrel’s common stock on June 15, 2021, and is subject to certain adjustments under the terms of the warrant transactions.
If the initial purchasers exercise their option to purchase additional notes, Cracker Barrel expects to enter into additional convertible note hedge transactions and additional warrant transactions with the hedge counterparties, which will initially cover the number of shares of Cracker Barrel’s common stock that will initially underlie the additional notes sold to the initial purchasers.
Cracker Barrel has been advised that in connection with establishing their initial hedges of the convertible note hedge and warrant transactions, the hedge counterparties or their respective affiliates expect to purchase shares of Cracker Barrel’s common stock and/or enter into various derivative transactions with respect to Cracker Barrel’s common stock concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of Cracker Barrel’s common stock or the notes at that time. The hedge counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to Cracker Barrel’s common stock and/or purchasing or selling Cracker Barrel’s common stock or other securities of Cracker Barrel in secondary market transactions following the pricing of the notes and prior to maturity of the notes (and are likely to do so during any observation period related to a conversion of the notes or following any purchase of the notes by Cracker Barrel on any fundamental change repurchase date, any redemption date, or any other date on which Cracker Barrel retires the notes if it elects to terminate the relevant portion of the convertible note hedge transactions).
The potential effect, if any, of these transactions and activities on the market price of Cracker Barrel’s common stock or the notes will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the value of Cracker Barrel’s common stock, which could affect the ability to convert the notes, the value of the notes and the amount of cash if any, and the number of and value of the shares of Cracker Barrel’s common stock, if any, holders would receive upon conversion of the notes.
The offer and sale of the notes, the warrants, and any shares of Cracker Barrel’s common stock issuable upon conversion of the notes or exercise of the warrants have not been registered under the Securities Act or any other applicable securities laws. As a result, the notes, the warrants, and the shares of Cracker Barrel’s common stock, if any, issuable upon conversion of the notes and/or exercise of the warrants will be subject to restrictions on transferability and resale and may not be offered, transferred or sold except in compliance with the registration requirements of the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws.
This press release does not and will not constitute an offer to sell, or the solicitation of an offer to buy, the notes, any shares of Cracker Barrel’s common stock issuable upon conversion of the notes, or any other securities, nor will there be any sale of the notes or any such shares or other securities, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful. Any offer will be made only by means of a private offering memorandum.
