Debt

3 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

Debt

Exchangeable Senior Notes

2023 Exchangeable Senior Notes

In 2018, Atlassian US, Inc., issued $1 billion in aggregate principal amount of the Notes. The Notes were senior, unsecured obligations of the Company, and were scheduled to mature on May 1, 2023, unless earlier exchanged by investors, or redeemed or repurchased by the Company. In connection with the issuance of the Notes, the Company entered into privately negotiated capped call transactions with certain financial institutions. The aggregate cost of the capped calls was $87.7 million. The capped call transactions were scheduled to expire in May 2023 and must be settled in cash.

The exchange feature of the Notes required bifurcation from the Notes and was accounted for as a derivative liability. The capped call transactions were accounted for as derivative assets. The Notes embedded exchange derivative liability and capped call assets were carried on the condensed consolidated balance sheets at their estimated fair values and were adjusted at the end of each reporting period, with unrealized gain or loss reflected in the condensed consolidated statements of operations.

The current or non-current classification of the embedded exchange derivative liability and the capped calls asset corresponded with the classification of the Notes on the condensed consolidated balance sheets. The classification was evaluated at each balance sheet date.

The Notes and capped calls were partially settled in fiscal year 2021 and fully settled in fiscal year 2022. There was no balance outstanding related to the Notes as of September 30, 2022 and June 30, 2022. During the three months ended September 30, 2021, the Company recognized net loss on exchange derivative and capped call transactions of $424.5 million.

Credit Facility

In October 2020, Atlassian US, Inc. entered into a credit agreement (the “Credit Agreement”) establishing a $1 billion senior unsecured delayed-draw term loan facility (the “Term Loan Facility”) and a $500 million senior unsecured revolving credit facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, the “Credit Facility”). The Company used the net proceeds of the Credit Facility for general corporate purposes, including repayment of the then existing indebtedness. The Credit Facility matures in October 2025 and bears interest, at the Company’s option, at a base rate plus a margin up to 0.50% or LIBOR rate plus a spread of 0.875% to 1.50%, in each case with such margin being determined by the Company’s consolidated leverage ratio. The Revolving Credit Facility may be borrowed, repaid, and re-borrowed until its maturity, and the Company has the option to request an increase of $250 million in certain circumstances. The Company may prepay the Credit Facility at its discretion without penalty. Commencing on October 31, 2023, the Company is obligated to repay the outstanding principal amount of the Credit Facility in installments on a quarterly basis in an amount equal to 1.25% of the Credit Facility borrowing amount until the maturity of the Credit Facility.

The Company incurred debt issuance costs of $4.4 million in connection with entering into the Credit Facility. The debt issuance costs were amortized over the terms of the term loan and revolving credit facility. As of September 30, 2022, $1.0 billion has been drawn under the Term Loan Facility. The Company is also obligated to pay a ticking fee and a commitment fee on the undrawn amounts of the Term Loan Facility and Revolving Credit Facility, respectively, at an annual rate ranging from 0.075% to 0.20%, determined by the Company’s consolidated leverage ratio.

The Credit Facility requires compliance with various financial and non-financial covenants, including affirmative and negative covenants. The financial covenants include a maximum consolidated leverage ratio of 3.5x, which ratio increases to 4.5x during the period of four fiscal quarters immediately following a material acquisition. As of September 30, 2022, the Company was in compliance with all related covenants.

On September 30, 2022, prior to the consummation of the U.S. Domestication, Atlassian Corporation Plc entered into Amendment No. 1 to the Credit Agreement (the “First Amendment”). The First Amendment sets forth the requirements for the assumption of the obligations of Atlassian Corporation Plc by Atlassian Corporation under the Credit Agreement and provides that the financial statements required to be delivered under the Credit Agreement, as amended, will be prepared in accordance with GAAP and financial definitions under the Credit Agreement, as amended, will be interpreted in accordance with GAAP.