In connection with the Notes Offering, the Company has entered into an ADS lending agreement, pursuant to which the Company will lend 2,606,278 ADSs to the ADS Borrower ("borrowed ADSs"). 261,000 of the borrowed ADSs have been initially issued at US$130.18 per ADS in the concurrent offering of ADSs, and the remaining borrowed ADSs are expected to be subsequently offered at prevailing market prices or at negotiated prices. The issuance of the borrowed ADSs is intended to allow some investors in the Notes to hedge their exposure to the Notes. The ADS Borrower will be required to return the borrowed ADSs to the Company pursuant to the ADS lending agreement following the maturity date. The borrowed ADSs are not outstanding for purposes of calculating earnings per share under current GAAP rules, and therefore the Company will not incur share or dividend dilution from the borrowed ADSs.Furthermore, the Company has entered into capped call transactions with some of the initial purchasers or their affiliates (the "Option Counterparties"). The capped call transactions are expected to reduce the potential dilution to existing holders of the ordinary share capital of the Company upon conversion of the Notes. As part of establishing, maintaining and unwinding their hedges of the capped call transactions, the Option Counterparties expect to enter into various derivative transactions with respect to the Company's ADSs and transactions in the Company's ADSs. This activity could affect the market price of the Company's ADSs or the Notes otherwise prevailing at that time. If any such capped call transactions fails to become effective, whether or not the Notes Offering is completed, the Option Counterparties may unwind their hedge positions with respect to the ADSs. The cap price of the capped call transactions will initially be US$221.31 per ADS, representing a premium of approximately 70% above the last reported sale price of US$130.18 per ADS on October 26, 2017, and is subject to adjustment under the terms of the capped call transactions.
The Notes have been offered in the United States to qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended (the "Securities Act"). The Notes, the ADSs deliverable upon conversion of the Notes and the ordinary shares represented thereby have not been and will not be registered under the Securities Act or the securities laws of any other place, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.This press release shall not constitute an offer to sell or a solicitation of an offer to purchase any securities, nor shall there be a sale of the securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. This press release contains information about the pending offerings of the Notes and the ADSs, and there can be no assurance that any of the offerings will be completed. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as "may," "should," "will," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "forecast," "project," or "continue," the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results. Any or all of the Company's forward-looking statements may turn out to be incorrect. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, readers should consider various factors, including the anticipated growth strategies of the Company, the future results of operations and financial condition of the Company, the economic conditions of China, the regulatory environment in China, the Company's ability to attract customers and leverage its brands, trends and competition in the lodging industry, the expected growth of the lodging market in China and other factors and risks outlined in the Company's filings with the Securities and Exchange Commission, including its annual report on Form 20-F and other filings. These factors may cause the Company's actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for the Company to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. Any projections in this release are based on limited information currently available to the Company, which is subject to change. This release also contains statements or projections that are based upon information available to the public, as well as other information from sources which the Company believes to be reliable, but it is not guaranteed by the Company to be accurate, nor does the Company purport it to be complete. The Company disclaims any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this document, except as required by applicable law.
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