iQIYI, Inc. announced that it has entered into a security purchase agreement for the issuance of convertible notes in an aggregate principal amount of $500,000,000 on August 30, 2022. The transaction will include participation from PAG Asia Capital, PAG Pegasus Fund LP and their affiliates. The company has also provided an option to the investors to subscribe for additional notes in an aggregate principal amount of up to $50,000,000 on the same terms and conditions, no later than two months from the closing date of the transaction.

The convertible notes will bear an interest rate of 6% per annum and will mature on the fifth anniversary of the issuance date. The notes may be convertible at the holder’s option into American Depositary Shares of the company, each currently representing seven Class A ordinary shares of the company, subject to the terms of the notes at a conversion premium of 20% above the volume weighted average price of the 20 trading days prior to, and including, August 29, 2022. Holders of the notes have the right to require the company to repurchase for cash all or part of their notes shortly upon the third anniversary of the issuance date at a repurchase price equal to 120% of the principal amount of the notes and at the fifth anniversary of the issue date, holders of the notes will be entitled to a maturity premium equal to 30% of the principal amount of the notes.

The investors also have the right to require the company to repurchase for cash all or part of their notes in the event of certain fundamental changes. Upon closing of the transaction and satisfaction of certain condition, PAG Asia shall be entitled to appoint one member to the board of directors of the company. The transaction is expected to close in the fourth quarter of 2022, subject to closing conditions.

The issuance of the securities in this transaction is exempt from registration under the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Securities Act.