Item 1.01. Entry into a Material Definitive Agreement.
Convertible Notes Offering
On September 12, 2023, Burlington Stores, Inc. (the “Company”) closed the issuance of approximately $297 million aggregate principal amount of its 1.25% convertible senior notes due 2027 (the “New Convertible Notes”) pursuant to separate, privately negotiated exchange and subscription agreements (the “Exchange and Subscription Agreements”) with a limited number of holders of its 2.25% convertible senior notes due 2025 (the “Existing Convertible Notes”) and certain investors, in each case pursuant to exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”). Pursuant to the Exchange and Subscription Agreements, the Company exchanged approximately $241 million in aggregate principal amount of the Existing Convertible Notes for approximately $255 million in aggregate principal amount of the New Convertible Notes (collectively, the “Exchange Transaction”). The Company also issued approximately $42 million in aggregate principal amount of New Convertible Notes in a private placement to certain investors (the “Subscription Transaction” and, together with the Exchange Transaction, the “Transactions”). An aggregate of up to 1,422,568 shares of common stock may be issued upon conversion of the New Convertible Notes, which number is subject to adjustment up to an aggregate of 1,911,372 shares following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, and which is also subject to certain anti-dilution adjustments. In connection with the Transactions, the Company repurchased an aggregate of 165,975 shares of Common Stock at a price per share of $155.42.
Indenture
The New Convertible Notes were issued pursuant to an Indenture, dated as of September 12, 2023, (the “Indenture”) between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”). The Indenture provides, among other things, that the New Convertible Notes are general unsecured obligations of the Company. The New Convertible Notes will bear interest at a rate of 1.25% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2023. The New Convertible Notes will mature on December 15, 2027, unless earlier converted, redeemed or repurchased.
Prior to the close of business on the business day immediately preceding September 15, 2027, the New Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the New Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The New Convertible Notes have an initial conversion rate of 4.8560 shares per $1,000 principal amount of New Convertible Notes (equivalent to an initial conversion price of approximately $205.93 per share of the Company’s common stock), subject to adjustment if certain events occur. The initial conversion price represents a conversion premium of approximately 32.50% over $155.42 per share, the last reported sale price of the Company’s common stock on September 7, 2023 (the pricing date of the offering) on The New York Stock Exchange. Upon conversion, the Company will pay cash up to the aggregate principal amount of New Convertible Notes being converted, and pay (and deliver, if applicable) cash, shares of the Company’s common stock or a combination thereof, at its election, in respect of the remainder (if any) of the Company’s conversion obligation in excess of such aggregate principal amount. The Company will not be able to redeem the New Convertible Notes prior to December 20, 2025. On or after December 20, 2025 and prior to the 21st scheduled trading day immediately preceding December 15, 2027, the Company will be able to redeem for cash all or any portion of the New Convertible Notes, at its option, if the last reported sale price of the Company’s common stock is equal to or greater than 130% of the conversion price for a specified period of time, at a redemption price equal to 100% of the aggregate principal amount of the New Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
If the Company undergoes a “fundamental change” as defined in the Indenture, subject to certain conditions, holders of the New Convertible Notes may require the Company to repurchase for cash all or any portion of their New Convertible Notes. The fundamental change repurchase price will be 100% of the aggregate principal amount of the New Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
If certain corporate events that constitute a “make-whole fundamental change” as set forth in the Indenture occur prior to the maturity date, or if the Company calls all or any portion of the New Convertible Notes for redemption, the conversion rate may, in certain circumstances, be increased for a holder who elects to convert its New Convertible Notes in connection with such event.
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