SUBSEQUENT EVENTS

9 Months Ended

Dec. 31, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Issuance and Sale of Series A Preferred Units of Nextracker

On February 1, 2022, affiliates of the Company entered into a purchase agreement (the “Purchase Agreement”) with TPG Rise Flash, L.P., a Delaware limited partnership, which is managed or advised by TPG Rise Climate, TPG, Inc.’s dedicated renewables and climate investing fund (“TPG Rise”), for the sale of 500,000 Series A Preferred Units (the “Preferred Units”) in Nextracker LLC (“Nextracker LLC” or “Nextracker”) for an aggregate purchase price of $500 million (the “Preferred Sale”). TPG Rise’s investment in approximately 16.7% of Nextracker LLC reflects an implied value for Nextracker LLC as of the date of the investment of $3.0 billion.

Dividends. The Preferred Units have a dividend rate of 5% per annum, payable semi-annually, up to 100% of which (less an amount necessary to fund TPG Rise’s tax obligations) may be payable in kind during the first two years following the closing of the Preferred Sale, and 50% of which may be payable in kind thereafter.

Conversion Ratio. The Preferred Units will be automatically converted into common units of Nextracker LLC upon a qualified initial public offering (a “Qualified Public Offering”) and TPG Rise may elect to convert the Preferred Units into common units of Nextracker LLC at any time after March 31, 2023. Subject to certain exceptions, for any mandatory or optional conversion, the conversion ratio for each Preferred Unit will be based on a deemed value of Nextracker LLC equal to the lesser of $3.0 billion and the implied equity valuation of Nextracker LLC determined by the underwriters engaged in connection with a Qualified Public Offering. If a Qualified Public Offering occurs by March 31, 2023 with an implied equity valuation greater than $3.75 billion, then the conversion ratio will be adjusted upwards based on a deemed value of Nextracker LLC equal to $3.2 billion. If a Qualified Public Offering occurs after March 31, 2023 with an implied equity valuation between $2.7 billion and $3.0 billion, then the conversion ratio will be based on a deemed value of Nextracker LLC equal to $3.0 billion. If a Qualified Public Offering occurs after March 31, 2023 with an implied equity valuation of less than $2.7 billion, then the conversion ratio will be based on a deemed value equal to the implied equity valuation of Nextracker LLC in the Qualified Public Offering divided by 90%. If TPG Rise elects to convert the Preferred Units prior to an initial public offering, the conversion ratio shall be based on a deemed value of Nextracker LLC equal to $3.0 billion.

Repurchase. At TPG Rise’s election, the Company is required to repurchase all of the outstanding Preferred Units at their liquidation preference, which shall include all contributed but unreturned capital plus accrued but unpaid dividends, at the earlier of certain change in control events and February 2, 2028. Additionally, if Nextracker has not completed a Qualified Public Offering prior to February 2, 2027, then TPG Rise may cause the Company to repurchase all of the outstanding Preferred Units at their fair market value (determined by a mutually agreeable third-party appraiser).

Voting Rights. The Preferred Units will vote together with the common units of Nextracker as a single class in all matters that are subject to a vote by common unitholders. In connection with the Preferred Sale, TPG Rise has the right to designate two members of the Board of Nextracker LLC; if, however, TPG Rise owns Preferred Units or common units of Nextracker LLC with a fully diluted ownership percentage of less than 10% but more than 5%, the number of Board members that TPG Rise will be entitled to designate will be reduced to one. So long as at least 51% of the Preferred Units remain outstanding, the consent of the holders of the Preferred Units must be obtained prior to taking certain actions regarding Nextracker LLC, including, but not limited to, changes to the terms of the Preferred Units that adversely affect the rights of holders of the Preferred Units, certain incurrences of indebtedness by Nextracker, certain capital expenditures, acquisitions or dispositions by Nextracker, and changes to the Board and management of Nextracker.

Conversion to Limited Liability Company. In connection with the Preferred Sale, Nextracker Inc. (the predecessor to Nextracker LLC) was converted to a limited liability company and will remain a subsidiary of the Company until the disposition of a majority of the securities of Nextracker LLC, in an initial public offering and/or other corporate transaction. The conversion of Nextracker Inc. is intended to facilitate an initial public offering in the future through what is commonly referred to as an umbrella partnership-C Corporation or an “Up-C” structure.

Separation and Transition Services Agreements. At the closing of the Preferred Sale, the Company, Flextronics International USA, Inc. and Nextracker LLC entered into a separation agreement and a transition services agreement to formally separate the operations of the businesses. The Company will report the Nextracker business as a separate operating and reportable segment for the fiscal year ending March 31, 2022.