RH (RH) Prices $300 Million Convertible Notes Offering

September 13, 2019 7:00 AM EDT

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RH (NYSE: RH) announced today the pricing of $300 million of 0.00% convertible notes due 2024 at a 25% conversion premium to yesterday’s closing stock price of $169.12. RH also granted the initial purchaser of the notes a 13-day option to purchase up to an additional $50 million of the notes on the same terms and conditions, for a total potential offering size of up to $350 million. The sale of the notes to the initial purchaser is expected to settle on September 17, 2019, subject to customary closing conditions.

In connection with the offering of the notes, RH has entered into convertible note hedge and warrant transactions on terms that have the effect of limiting earnings dilution as a result of the convertible notes issuance up to a 100% premium to today’s closing stock price. Under the terms of these transactions, the Company’s shareholders are not expected to experience earnings dilution until the Company’s stock price is above approximately $338.24.

RH expects to use the net proceeds from the offering to (i) pay the net costs of the convertible note hedge and warrant transactions, (ii) retire the Company’s $200 million of outstanding second lien debt, (iii) reduce outstanding borrowings under the Company’s credit facilities and (iv) for general corporate purposes.

The notes will not bear interest and will mature on September 15, 2024, unless earlier purchased by us or converted. The initial conversion rate is 4.7304 shares of common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $211.40 per share representing a premium of 25% over yesterday’s closing stock price. The notes will be convertible into cash, shares of RH’s common stock, or a combination thereof, at RH’s election.

This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. The notes and the shares of common stock issuable upon conversion of the notes, if any, will not be registered under the Securities Act of 1933, as amended (the “Act”), or any state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Act and applicable state laws.

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