Redeemable Convertible Preferred Stock |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock
In June 2017, we entered into an agreement with Sirius XM Radio, Inc. ("Sirius XM") to sell 480,000 shares of Series A redeemable convertible preferred stock ("Series A") for $1,000 per share, with gross proceeds of $480.0 million (the "Sirius XM Investment Agreement"). The Series A shares will be issued in two rounds: an initial closing of 172,500 shares for $172.5 million that occurred on June 9, 2017 upon signing the agreement with Sirius XM, and an additional closing of 307,500 shares for $307.5 million that is subject to antitrust clearance and other customary closing conditions. We expect the additional closing to occur in the fourth quarter of 2017. In the three and six months ended June 30, 2017, total proceeds to the Company from the initial closing, net of preferred stock issuance costs of $13.9 million, were $158.6 million, exclusive of the termination fee paid to KKR Classic Investors L.P. ("KKR"), and certain related expenses, totaling $23.5 million as described below.
Conversion Feature
Holders of the Series A shares have the option, at any time after the additional closing, or if the Sirius XM Investment Agreement is terminated prior to the additional closing, the date of such termination, to convert their shares plus any accrued dividends into common stock. We have the right to settle the conversion in cash, common stock or a combination thereof. The conversion rate for the Series A is initially 95.2381 shares of common stock per each share of Series A, which is equivalent to an initial conversion price of approximately $10.50 per share of our common stock, and is subject to adjustment in certain circumstances. Dividends on the Series A will accrue on a daily basis, whether or not declared, and will be payable on a quarterly basis at a rate of 6% per year. We have the option to pay dividends in cash when authorized by the Board and declared by the Company or accumulate dividends in lieu of paying cash. Dividends accumulated in lieu of paying cash will continue to accrue and cumulate at rate of 6% per year.
Redemption Feature
Under certain circumstances, we will have the right to redeem the Series A on or after the date which is three years after the additional closing or, if the additional closing does not occur, the third anniversary of the initial closing. The Series A holders will have the right to require us to redeem the Series A on or after the date which is five years after the additional closing or, if the additional closing does not occur, the fifth anniversary of the initial closing. Any optional redemption of the Series A will be at a redemption price equal to 100% of the liquidation preference, plus accrued and unpaid dividends to, but excluding, the redemption date. We have the option to redeem the Series A in cash, common stock or a combination thereof.
Fundamental Changes
If certain fundamental changes involving the Company occur, including change in control or liquidation, the Series A will be redeemed subject to certain adjustments, as determined by the date of the fundamental change. The change in control amount is the greater of the redemption value of 100% of the liquidation preference, plus all accrued dividends unpaid through the fifth anniversary of the initial closing, assuming the shares would have remained outstanding through that date, or the price that common stockholders would receive if the Series A shares had been redeemed immediately prior to the announcement of the change in control.
Recognition
Since the redemption of the Series A is contingently or optionally redeemable and therefore not certain to occur, the Series A is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. As the Series A is redeemable at the option of the holders and is redeemable in certain circumstances upon the occurrence of an event that is not solely within the Company's control, we have classified the Series A in the redeemable convertible preferred stock line item in our condensed consolidated balance sheets. We did not identify any embedded features that would require bifurcation from the equity-like host instrument. We have elected to recognize the Series A at the redemption value at each period end, and have recorded the issuance costs through retained earnings as a deemed preferred stock dividend. In addition, we have elected to account for the 6% dividend at the stated rate.
Contract Termination Fees
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