Apr 21, 2020
The notes will bear interest at a rate of 2.25% per year, payable semi-annually in arrears on
Upon conversion, the notes may be settled in shares of 2U's common stock, cash or a combination of cash and shares of 2U's common stock, at 2U's option. Holders of the notes will have the right to require 2U to repurchase all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change (as defined in the indenture governing the notes). The conversion rate will initially be 35.3773 shares of 2U's common stock per
2U may not redeem the notes prior to
When issued, the notes will be senior, unsecured obligations of 2U and will be equal in right of payment with 2U's senior, unsecured indebtedness; senior in right of payment to 2U's indebtedness that is expressly subordinated to the notes; effectively subordinated to 2U's senior, secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and structurally subordinated to all indebtedness and other liabilities, including trade payables, and (to the extent 2U is not a holder thereof) preferred equity, if any, of 2U's subsidiaries.
In connection with the pricing of the notes, 2U entered into privately negotiated capped call transactions with certain of the initial purchasers of the notes and/or their respective affiliates (in this capacity, the "option counterparties"). The capped call transactions are expected generally to reduce the potential dilution to 2U's common stock upon any conversion of the notes and/or to offset any cash payments 2U is required to make in excess of the principal amount of the converted notes, as the case may be, upon any conversion of notes, with such reduction and/or offset subject to a cap. The cap price of the capped call transactions will initially be
2U estimates that the net proceeds from the offering will be approximately
In connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates expect to purchase shares of 2U's common stock and/or enter into various derivative transactions with respect to 2U's common stock concurrently with, or shortly after, the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of 2U's common stock or the notes at that time. In addition, 2U expects that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to 2U's common stock and/or purchasing or selling shares of 2U's common stock or other of 2U's securities in secondary market transactions from time to time prior to the maturity of the notes (and are likely to do so following any conversion of the notes, any repurchase of the notes by us on any fundamental change repurchase date, any redemption date or any other date on which the notes are retired by us, in each case, if we exercise our option to terminate the relevant portion of the capped call transactions). This activity could also cause or avoid an increase or a decrease in the market price of 2U's common stock or the notes, which could affect the ability of holders of the notes to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of notes, it could affect the number of shares of 2U's common stock and value of the consideration that holders of notes will receive upon conversion of such notes.
The notes will be sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. The offer and sale of the notes and the shares of 2U's common stock potentially 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
This press release does not and shall not constitute an offer to sell or the solicitation of an offer to buy any notes or shares of 2U's common stock, nor shall there be any offer, solicitation or sale of notes or such common stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
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This press release contains forward-looking statements regarding the offering of the notes and the capped call transactions, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this press release, including statements regarding whether 2U will issue the notes, the anticipated use of the net proceeds from the offering and expectations regarding the effect of the capped call transactions and regarding actions of the option counterparties and/or their respective affiliates, are forward-looking statements. 2U has based these forward-looking statements on its current expectations and projections about future events as of the date of this press release. The company undertakes no obligation to update these statements as a result of new information or future events. These forward-looking statements are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from the results predicted, including, but not limited to, risks related to the offering of the notes and the consummation of the capped call transactions, including that such transactions may not occur, market risks and uncertainties and the impact of any natural disasters or public health emergencies, such as the COVID-19 outbreak. These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed under the heading "Risk Factors" in 2U's Annual Report on Form 10-K for the year ended
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