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    ETSY   US29786A1060

ETSY, INC.

(ETSY)
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ETSY INC : Entry into a Material Definitive Agreement, Other Events (form 8-K)

06/11/2021 | 05:02pm EDT
Item 1.01 Entry into a Material Definitive Agreement.
Indenture and Notes
On June 11, 2021, Etsy, Inc. ("Etsy") completed its previously announced private
offering of an aggregate of $1.0 billion principal amount of its 0.25%
Convertible Senior Notes due 2028 (the "Notes") to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"). The Notes were issued pursuant to an Indenture, dated June
11, 2021 (the "Indenture"), between Etsy and U.S. Bank National Association, as
trustee (the "Trustee").
The Notes are senior, unsecured obligations of Etsy. The Notes bear interest at
a rate of 0.25% per year, payable semiannually in arrears on June 15 and
December 15 of each year, beginning on December 15, 2021. The Notes will mature
on June 15, 2028, unless earlier converted, redeemed or repurchased. The Notes
are convertible into cash, shares of Etsy's common stock or a combination of
cash and shares of Etsy's common stock, at Etsy's election.
Holders may convert their Notes at their option at any time prior to the close
of business on the business day immediately preceding February 15, 2028 only
under the following circumstances: (1) during any calendar quarter commencing
after the calendar quarter ending on September 30, 2021 (and only during such
calendar quarter), if the last reported sale price of Etsy's common stock for at
least 20 trading days (whether or not consecutive) during a period of 30
consecutive trading days ending on, and including, the last trading day of the
immediately preceding calendar quarter is greater than or equal to 130% of the
conversion price on each applicable trading day; (2) during the five business
day period after any ten consecutive trading day period (the "measurement
period") in which the trading price (as defined in the Indenture) per $1,000
principal amount of Notes for each trading day of the measurement period was
less than 98% of the product of the last reported sale price of Etsy's common
stock and the conversion rate on each such trading day; (3) if Etsy calls such
Notes for redemption, at any time prior to the close of business on the second
scheduled trading day immediately preceding the redemption date, but only with
respect to the Notes called (or deemed called) for redemption; or (4) upon the
occurrence of specified corporate events. On or after February 15, 2028 until
the close of business on the second scheduled trading day immediately preceding
the maturity date, holders may convert their Notes at any time, regardless of
the foregoing circumstances. Upon conversion, Etsy will pay or deliver, as the
case may be, cash, shares of its common stock or a combination of cash and
shares of its common stock, at Etsy's election.
The conversion rate will initially be 4.0518 shares of Etsy's common stock per
$1,000 principal amount of Notes (equivalent to an initial conversion price of
approximately $246.80 per share of Etsy's common stock). The initial conversion
price of the Notes represents a premium of approximately 45.0% over the last
reported sale price of Etsy's common stock on June 8, 2021. The conversion rate
is subject to adjustment under certain circumstances in accordance with the
terms of the Indenture. In addition, following certain corporate events that
occur prior to the maturity date, or if Etsy delivers a notice of redemption,
Etsy will, in certain circumstances, increase the conversion rate for a holder
who elects to convert its Notes in connection with such a corporate event or
convert its Notes called (or deemed called) for redemption in connection with
such notice of redemption, as the case may be, subject to a maximum conversion
rate of 5.8750 shares of Etsy's common stock per $1,000 principal amount of
Notes. A maximum of 5,875,000 shares of Etsy's common stock may be issued upon
conversion of the Notes in full, based on this maximum conversion rate, which is
subject to customary adjustments set forth in the Indenture.
Etsy may not redeem the Notes prior to June 20, 2025. Subject to a partial
redemption limitation set forth in the Indenture, Etsy may redeem for cash all
or any portion of the Notes, at its option, on or after June 20, 2025 if the
last reported sale price of Etsy's common stock has been at least 130% of the
conversion price then in effect for at least 20 trading days (whether or not
consecutive), including the trading day immediately preceding the date on which
Etsy provides notice of redemption, during any 30 consecutive trading day period
ending on, and including, the trading day immediately preceding the date on
which Etsy provides notice of redemption at a redemption price equal to 100% of
the principal amount of the Notes to be redeemed, plus accrued and unpaid
interest to, but excluding, the redemption date. No sinking fund is provided for
the Notes.
If Etsy undergoes a fundamental change (as defined in the Indenture), subject to
certain conditions and except as set forth in the Indenture, holders may require
Etsy to repurchase for cash all or any portion of their Notes at a fundamental
change repurchase price equal to 100% of the principal amount of the Notes to be
repurchased, plus accrued and unpaid interest to, but excluding, the fundamental
change repurchase date.
The Indenture includes customary terms and covenants, including certain events
of default. The following events are considered "events of default" with respect
to the Notes, which may result in the acceleration of the maturity of the Notes:
(1) Etsy defaults in any payment of interest on any Note when due and payable,
and the default continues for a period of 30 days; (2) Etsy defaults in the
payment of principal of any Note when due and payable at its stated maturity,
upon optional redemption, upon any required repurchase, upon declaration of
acceleration or otherwise; (3) failure by Etsy to comply with Etsy's obligation
to convert the Notes in accordance with the Indenture upon exercise of a
holder's conversion right and such failure continues for five (5) business days;
(4) failure by Etsy to give a fundamental change notice, notice of a make-whole
fundamental change (as defined in the Indenture) or notice of a specified
corporate transaction, in each case when due and such failure continues for five
(5) business days; (5) failure by Etsy to comply with its obligations under the
Indenture with respect to consolidation, merger and sale of Etsy's assets; (6)
failure by Etsy for 60 days after written notice from the Trustee or the holders
of at least 25% in principal amount of the Notes then outstanding has been
received to comply with any of Etsy's other agreements contained in the Notes or
Indenture; (7) Etsy or any of its significant subsidiaries (as defined in the
Indenture) defaults with respect to any mortgage, agreement or other instrument
under which there may be outstanding, or by which there may be secured or
evidenced, any indebtedness for money borrowed in excess of $100 million (or its
foreign currency equivalent) in the aggregate of Etsy and/or any such
significant subsidiary, whether such indebtedness now exists or shall hereafter
be created (i) resulting in such
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indebtedness becoming or being declared due and payable prior to its stated
maturity date or (ii) constituting a failure to pay the principal of any such
debt when due and payable (after the expiration of all applicable grace periods)
at its stated maturity, upon required repurchase, upon declaration of
acceleration or otherwise, and, in the cases of clauses (i) and (ii), such
acceleration shall not have been rescinded or annulled or such failure to pay or
default shall not have been cured or waived, or such indebtedness is not paid or
discharged, as the case may be, within 30 days after written notice to Etsy by
the Trustee or to Etsy and the Trustee by holders of at least 25% in aggregate
principal amount of Notes then outstanding in accordance with the Indenture; or
(8) certain events of bankruptcy, insolvency, or reorganization of Etsy or any
of its significant subsidiaries. Generally, if an event of default occurs and is
continuing under the Indenture, either the Trustee or the holders of at least
25% in aggregate principal amount of the Notes then outstanding may declare the
principal amount plus any accrued and unpaid interest on the Notes to be
immediately due and payable.
The Notes are Etsy's general unsecured obligations and rank senior in right of
payment to all of Etsy's indebtedness that is expressly subordinated in right of
payment to the Notes; equal in right of payment with all of Etsy's liabilities
that are not so subordinated, including Etsy's 0% Convertible Senior Notes due
2023, Etsy's 0.125% Convertible Senior Notes due 2026, and Etsy's 0.125%
Convertible Senior Notes due 2027; effectively junior to any of Etsy's secured
indebtedness (including any amounts outstanding from time to time under that
certain credit agreement, dated as of February 25, 2019, among Etsy, Inc.,
Citibank, N.A. as administrative agent and the other lenders party thereto) to
the extent of the value of the assets securing such indebtedness; and
structurally junior to all indebtedness and other liabilities (including trade
payables) of Etsy's subsidiaries.
The net proceeds from the offering were approximately $986.7 million, after
deducting the initial purchasers' discount and estimated offering expenses
payable by Etsy. Etsy used a portion of the net proceeds from the offering to
pay the cost of the capped call transactions described below. In addition, Etsy
used approximately $180.0 million of the net proceeds from the offering to
repurchase approximately 1.1 million shares of Etsy's common stock in privately
negotiated transactions effected through Goldman Sachs & Co. LLC or one of its
affiliates at a purchase price equal to $170.21 (the last reported sale price
per share of Etsy's common stock on June 8, 2021). Etsy intends to use the
remainder of the net proceeds from the offering for general corporate purposes,
which may include other repurchases of Etsy's common stock from time to time
under Etsy's existing stock repurchase program or any future stock repurchase
program, working capital, operating expenses and capital expenditures.
A copy of the Indenture and form of Note are filed as Exhibit 4.1 and Exhibit
4.2, respectively, to this Current Report on Form 8-K and are incorporated by
reference herein. The foregoing description of the Indenture and Notes does not
purport to be complete and is qualified in its entirety by reference to such
exhibits.
Capped Call Transactions
On June 8, 2021, concurrently with the pricing of the Notes, Etsy entered into
capped call transactions with one of the initial purchasers and other financial
institutions (the "Option Counterparties"). Etsy used $85.0 million of the net
proceeds from the offering of the Notes to pay the cost of the capped call
transactions. The capped call transactions are expected generally to reduce
potential dilution to Etsy's common stock upon any conversion of Notes and/or
offset any cash payments Etsy is required to make in excess of the principal
amount of converted Notes, as the case may be, with such reduction and/or offset
subject to a cap initially equal to $340.42 (which represents a premium of 100%
over the last reported sale price of Etsy's common stock on June 8, 2021). The
capped call transactions are separate transactions, entered into by Etsy with
the Option Counterparties, and are not part of the terms of the Notes.
A copy of the form of confirmation for the capped call transactions is filed as
Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference
herein. The foregoing description of the terms of the capped call transaction
does not purport to be complete and is qualified in its entirety by reference to
such exhibit.
Item 2.03 Creation of a Direct Financial Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
See Item 1.01 above, which is incorporated by reference herein.
Item 3.02 Unregistered Sale of Equity Securities.
See Item 1.01 above, which is incorporated by reference herein.
The Notes were offered and sold to the initial purchasers in reliance on the
exemption from the registration requirements provided by Section 4(a)(2) of the
Securities Act and the Notes were resold to qualified institutional buyers as
defined in, and in reliance on, Rule 144A of the Securities Act. The offer and
sale of the Notes and the common stock issuable upon conversion of the Notes
have not been and will not be registered under the Securities Act or the
securities laws of any other jurisdiction, and such securities may not be
offered or sold in the United States absent registration or an applicable
exemption from registration requirements.
This Current Report on Form 8-K does not constitute an offer to sell, or a
solicitation of an offer to buy, any security and shall not constitute an offer,
solicitation or sale in any jurisdiction in which such offering would be
unlawful.

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Item 8.01 Other Events.
On June 7, 2021, Etsy issued a press release announcing the launch of the
offering of the Notes. On June 9, 2021, Etsy issued a press release announcing
the pricing of the offering of the Notes. Copies of the press releases are filed
as Exhibits 99.2 and 99.3 to this Current Report on Form 8-K and are
incorporated by reference herein.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the
meaning of the federal securities laws. These statements include, but are not
limited to, statements concerning the use of proceeds from the offering of the
Notes and the timing or amount of any repurchases of common stock by Etsy.
Forward-looking statements include all statements that are not historical facts.
In some cases, forward-looking statements can be identified by terms such as
"anticipates," "believes," "could," "enables," "estimates," "expects,"
"intends," "may," "plans," "potential," "will," or similar expressions and the
negatives of those words. Forward-looking statements involve substantial risks
and uncertainties that may cause actual results to differ materially from those
that Etsy expects. These and other risks and uncertainties include market risks,
trends and conditions. These and other risks and uncertainties are more fully
described in Etsy's filings with the Securities and Exchange Commission,
including in the section titled "Risk Factors" in Etsy's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2021, and subsequent reports that Etsy
files with the Securities and Exchange Commission. In light of these risks, you
should not place undue reliance on such forward-looking statements.
Forward-looking statements represent Etsy's beliefs and assumptions only as of
the date of this Current Report on Form 8-K. Etsy disclaims any obligation to
update forward-looking statements.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.              Description
                           Indenture, dated as of June 11, 2021, by and between Etsy, Inc. and U.S.
  4.1                    Bank National Association, as Trustee.
                           Form of Note, representing Etsy, Inc.'s 0.25% Convertible Senior Notes
  4.2                    due 2028 (included as Exhibit A to the Indenture filed as Exhibit 4.1).
  99.1                     Form of Confirmation for 2021 Capped Call Transactions.
  99.2                     Press Release issued by Etsy, Inc. on June     7    , 2021    .
  99.3                     Press Release issued by Etsy, Inc. on June     9    , 2021    .
                         Cover Page Interactive Data File - the cover page XBRL tags are embedded
104                      within the Inline XBRL document.


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