CBRL plans amendment to 3% convertibles to add net share settlement feature, then redemption

By Jennifer Chiou

New York, March 6 - CBRL Group, Inc. announced that it expects to propose an amendment to its 3% convertible senior notes due 2032 to provide a net share settlement feature on conversion.

Upon conversion by holders, this feature would require CBRL to settle the conversion in cash up to the accreted principal amount of notes.

The excess, if any, of the conversion value over the accreted principal amount would be settled in stock.

As a result, CBRL said, the share dilution from conversion of the notes would be significantly reduced.

CBRL said it is studying the most efficient method by which to implement this change, indicating that among the possible courses of action would be either a consent solicitation with existing note holders or an exchange offer by which note holders would be offered a new security that contains the net share settlement feature.

After providing for the net share settlement feature, the said it intends to redeem the notes, drawing on its previously disclosed $200 million delayed-draw term loan, by using cash on hand and/or engaging in another financing transaction.

CBRL said that the redemption could be completed as early as prior to the end of its fiscal year on Aug. 3.

The company also announced that, linked to the terms of the indenture, noteholders may put back their securities until 5 p.m. ET on April 3.

Holders may require CBRL to purchase notes at a price of $475.01 per $1,000 principal amount at maturity.

Each note is convertible into 10.8584 CBRL shares. The company said that the put value is the equivalent of $43.75 per associated common share.

Based on Tuesday's closing price for the company's common stock of $46.44, the conversion value exceeds the put value, and, accordingly, CBRL does not expect holders to exercise their put right.

In addition, CBRL said that through March 2, it had repurchased an aggregate of 1,352,500 shares for $63.9 million.

CBRL is a Lebanon, Tenn.-based operator of Cracker Barrel Old Country Store restaurants and gift shops.

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