Cinemark Holdings, Inc. (the “Company”) (NYSE:CNK) announced today that it priced $400 million aggregate principal amount of its 4.50% Convertible Senior Notes due 2025 (the “Notes”) in a private offering (the “Offering”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Company has also granted the initial purchasers of the Notes a 13-day option to purchase up to an additional $60 million aggregate principal amount of the Notes. The Offering is expected to close on August 21, 2020, subject to customary closing conditions.
The Notes will be senior unsecured obligations of the Company and will bear interest at a rate of 4.50% per annum, payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2021. The Notes will mature on August 15, 2025, unless earlier repurchased or converted, and the Company will not have the right to redeem the Notes prior to maturity. The initial conversion rate will be 69.6767 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $14.35 per share of common stock) and is subject to certain adjustments under the terms of the Notes. The initial conversion price of the Notes represents a premium of 30% over the last reported sale price of the Company’s common stock on The New York Stock Exchange on August 18, 2020. The Notes will be convertible at the option of the holders and may be settled, at the Company’s election, in cash, shares of the Company’s common stock or a combination thereof. Prior to the close of business on the business day immediately preceding May 15, 2025, the Notes will be convertible at the option of the holders of the Notes only upon the satisfaction of specified conditions and during certain periods. On or after May 15, 2025, holders may convert their Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. If the Company undergoes certain fundamental changes, holders of the Notes may require the Company to repurchase for cash all or part of their Notes at a purchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but not including, the fundamental change repurchase date. In addition, if a make-whole fundamental change occurs prior to the maturity date, the Company will, under certain circumstances, increase the conversion rate for holders who convert Notes in connection with such make-whole fundamental change.
The Company intends to use $45.8 million of net proceeds from the Offering to pay the cost of the convertible note hedge transactions described below (after such cost is partially offset by the proceeds to the Company from the warrant transactions described below). The Company intends to use any remaining net proceeds from the Offering for general corporate purposes, which may include repaying outstanding amounts under the revolving credit line of the amended and restated senior secured credit facility of the Company’s wholly-owned subsidiary, Cinemark USA, Inc. If the initial purchasers exercise their option to purchase additional Notes, the Company expects to use a portion of the net proceeds from the sale of the additional Notes to enter into additional convertible note hedge transactions (after such cost is partially offset by the proceeds to the Company of the additional warrant transactions that the Company expects to enter into in connection with the additional Notes). The Company intends to use the remainder of such net proceeds for general corporate purposes.
In connection with pricing of the Notes, the Company entered into privately negotiated convertible note hedge and warrant transactions with one or more of the initial purchasers of the Notes or their respective affiliates (the “Option Counterparties”). The exercise price of the warrants is initially $22.08, which represents a premium of 100% over the last reported sale price of the Company's common stock on The New York Stock Exchange on August 18, 2020, and is subject to certain adjustments under the terms of the warrant transactions.
In connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the Option Counterparties have advised the Company that they expect to purchase shares of the Company’s common stock and/or enter into various derivative transactions with respect to the Company’s common stock concurrently with or shortly after pricing of the Notes. This activity could increase (or reduce the size of any decrease in) the market price of the Company’s common stock at that time. In addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivatives with respect to the Company’s common stock and/or purchasing or selling the Company’s common stock or other securities of the Company in secondary market transactions following the pricing of the Notes and prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of the Notes or in connection with any repurchase of the Notes by the Company on any fundamental change repurchase date or otherwise). This activity could also cause or avoid an increase or a decrease in the market price of the Company’s common stock or the Notes, which could affect a holder’s ability to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of the Notes, it could affect the amount and value of the consideration that a holder will receive upon conversion of such Notes.
The Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. Neither the Notes nor any shares of the Company’s common stock issuable upon conversion of the Notes have been or will be registered under the Securities Act or the securities laws of any state or other jurisdiction, and such securities may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities or blue sky laws and foreign securities laws.
This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities, nor shall there be any sales of securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This notice is being issued pursuant to and in accordance with Rule 135c under the Securities Act.
About Cinemark Holdings:
Headquartered in Plano, TX, Cinemark (NYSE: CNK) is one of the largest and most influential movie theatre companies in the world. Cinemark’s circuit, comprised of various brands that also include Century, Tinseltown and Rave, operates 534 theatres with 5,977 screens in 42 states domestically and 15 countries throughout South and Central America. Cinemark consistently provides an extraordinary guest experience from the initial ticket purchase to the closing credits, including Movie Club, the first U.S. exhibitor-launched subscription program; the highest Luxury Lounger recliner seat penetration among the major players; XD - the No. 1 exhibitor-brand premium large format; and expansive food and beverage options to further enhance the movie-going experience.
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