IRDM

SEC Filing Summary: GHL Acquisition Corp. (10-Q)

Business Context and Reporting Period

This filing covers the quarterly period ended June 30, 2008, for GHL Acquisition Corp., a blank check company (Special Purpose Acquisition Company) incorporated in Delaware on November 2, 2007. The company is in the development stage and has not yet commenced any operations. Its sole purpose is to effect a merger, capital stock exchange, or asset acquisition with one or more target businesses. The company consummated its Initial Public Offering (IPO) on February 21, 2008, and is currently evaluating prospective targets. If a business combination is not completed by February 14, 2010, the company will liquidate.

Key Financial Metrics

Material Changes vs. Prior Period

• Capitalization: The company transitioned from a pre-IPO shell with $500,000 in total assets (Dec 31, 2007) to a post-IPO entity with over $401 million in assets following the February 2008 public offering.
• Revenue Generation: The company generated no operating revenue. Net income of $1.45 million for the six-month period was derived entirely from interest income earned on the Trust Account, offset by formation costs and income taxes.
• Liquidity: Unrestricted cash decreased from $184,378 at year-end 2007 to $36,963 at June 30, 2008, as funds were utilized for offering costs and working capital. However, the Trust Account balance increased significantly to $401.5 million.
• Liabilities: Total liabilities increased to $11.6 million, primarily driven by the accrual of deferred underwriting commissions ($11.3 million) and income taxes payable ($81,929).

Outlook, Risks, and Management Commentary

• Business Combination Deadline: The company must complete a business combination by February 14, 2010, or it will cease operations and liquidate.
• Liquidity Strategy: Management expects to fund operations through February 2010 using the $1.1 million of proceeds held outside the trust, plus up to $5 million of interest income withdrawable from the trust for working capital and tax obligations. As of June 30, 2008, the company had withdrawn $1.466 million from the trust ($200,000 for working capital and $1.266 million for taxes).
• Redemption Rights: Public stockholders may redeem their shares for cash upon the consummation of a business combination if they vote against it. The redemption price is based on the Trust Account balance per share.
• Risks: The filing highlights risks associated with development stage companies, including the inability to find a suitable target, the potential for the Trust Account to be subject to third-party claims (though waivers are sought), and the risk that the per-share liquidation value may be less than the IPO price if warrants are deemed to have no value.
• Market Risk: The company is exposed to interest rate risk regarding the short-term government securities held in the Trust Account, though management does not believe this poses a material exposure due to the short-term nature of the investments.

Investor Verification Checklist

• Trust Account Status: Verify the current balance of the Trust Account and confirm that the $400 million principal plus accrued interest remains intact and segregated.
• Deferred Underwriting Fees: Confirm the obligation of $11.3 million in deferred underwriting fees, which is payable only upon the successful consummation of a business combination.
• Related Party Transactions: Review the $10,000 monthly administrative fee paid to the Founder (Greenhill & Co., Inc.) and the terms of the private placement warrants purchased by the Founder.
• Redemption Thresholds: Understand the conditions under which public stockholders can redeem shares (voting against a deal) and the impact of the 30% redemption threshold on the company's ability to proceed with a transaction.
• Liquidation Timeline: Monitor progress toward a business combination relative to the February 14, 2010, liquidation deadline.