Redeemable preferred shares

6 Months Ended

Aug. 03, 2024

On October 5, 2016, the Company issued 625,000 redeemable Series A Convertible Preference Shares (“Preferred Shares”) to Green Equity Investors VI, L.P., Green Equity Investors Side VI, L.P., LGP Associates VI-A LLC and LGP Associates VI-B LLC, all affiliates of Leonard Green & Partners, L.P. (together, the “Preferred Holders”), for an aggregate purchase price of $625.0 million, or $1,000 per share (the “Stated Value”) pursuant to the investment agreement dated August 24, 2016. The Preferred Shares are classified as temporary equity within the condensed consolidated balance sheets.

On March 30, 2024, Signet’s Board of Directors (the “Board”) approved amendments to the Certificate of Designation to be effective as of April 1, 2024, including to provide for net share settlement upon conversion of the Preferred Shares. Under the terms of the net share settlement, in the event of a mandatory conversion by the Company or a conversion at the option of a Preferred Holder, in exchange for each Preferred Share, Signet will deliver cash for the stated value of the Preferred Share, and may elect to deliver any net settlement amount in excess of stated value in cash, shares or a combination of cash and shares. The current stated value of the Preferred Shares is $1,050.94 per share. The amended Certificate of Designation also includes certain restrictions on the Preferred Holders’ rights to convert the Preferred Shares, including: (a) prior to May 1, 2024, the Preferred Holders may not convert more than 50% of the Preferred Shares in the aggregate; and (b) after May 1, 2024, the Preferred Holders may not convert more than $110.0 million of stated value of the Preferred Shares (in aggregate) in any 30-day period prior to November 15, 2024. No other modifications to the terms of the Certificate of Designation were made.

On April 1, 2024, following the effectiveness of the amended Certificate of Designation, the Preferred Holders delivered notice to the Company of a conversion of 312,500 Preferred Shares (in the aggregate). In accordance with the terms of the amended Certificate of Designation, the conversion was settled in cash by the Company for $414.1 million on April 15, 2024, which included $2.1 million of accrued and unpaid dividends as of the date of conversion. The excess of the settlement amount (excluding dividends) over the stated value of the Preferred Shares was $83.6 million, which was recorded as a deemed dividend and a charge to net (loss) income attributable to common shareholders in the condensed consolidated statement of operations. The Company also incurred $1.5 million of expenses directly related to the redemption and recorded this as an additional deemed dividend charged to net (loss) income attributable to common shareholders, which was included in accrued expenses and other current liabilities in the condensed consolidated balance sheet as of August 3, 2024.

On May 6, 2024, the Preferred Holders elected to convert an additional 100,000 Preferred Shares. Upon notice of conversion, the Company elected to settle the full conversion amount totaling $129.0 million in cash, which was paid on May 20, 2024. The excess of the settlement amount over the stated value of the Preferred Shares was $23.9 million, and was recorded as a direct reduction to additional paid-in capital in the condensed consolidated balance sheet.

The following table presents certain conversion measures as of August 3, 2024, February 3, 2024 and July 29, 2023:


(in millions, except conversion rate and conversion price)	August 3, 2024		February 3, 2024		July 29, 2023
Conversion rate	12.6933		12.5406		12.5406
Conversion price	$	78.7817	$	79.7410	$	79.7410
Potential impact of Preferred Shares if-converted to common shares (1)	—		8.2		8.2
Liquidation preference (2)	$	226.1	$	665.1	$	665.1

(1) The potential impact of conversion of the outstanding Preferred Shares as of August 3, 2024 reflects the modified net share settlement provisions described above, based on the volume weighted average price per share as of the last trading date of the second quarter, which was below the conversion price.

(2) Includes the Stated Value of the Preferred Shares plus any declared but unpaid dividends.

In connection with the issuance of the Preferred Shares, the Company incurred direct and incremental expenses of $13.7 million, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. These direct and incremental expenses originally reduced the carrying value of the Preferred Shares and are accreted through retained earnings as a deemed dividend from the date of issuance through the then first known redemption date in November 2024. Accumulated accretion recorded in the condensed consolidated balance sheets was $13.5 million as of August 3, 2024 (February 3, 2024 and July 29, 2023: $12.4 million and $11.5 million, respectively).

Accretion of $0.2 million and $1.1 million was recorded to Preferred Shares in the condensed consolidated balance sheets during the 13 and 26 weeks ended August 3, 2024 and $0.4 million and $0.8 million for the 13 and 26 weeks ended July 29, 2023.