Sky Harbour Group Corp current report, 01 August 2021

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Business Context and Reporting Period

Yellowstone Acquisition Company filed this Form 8-K on August 3, 2021, reporting the execution of a definitive equity purchase agreement with Sky Harbour LLC on August 1, 2021. The proposed business combination would result in Yellowstone being renamed Sky Harbour Group Corporation and operating in an Up-C structure. The filing is transaction-related and does not provide operating results for Sky Harbour or Yellowstone for a comparable reporting period.

Key Financial and Transaction Metrics

  • Approximately $138 million was held in Yellowstone’s trust account from its initial public offering and related private placement.
  • Boston Omaha Corporation, through BOC YAC Funding LLC, agreed to invest $55 million directly into Sky, subject to Sky raising at least $80 million in gross proceeds from a private activity bond offering. Upon closing, the investment would convert into 5.5 million shares of post-combination Class A common stock valued at $10 per share.
  • The parties expected to pursue approximately $100 million of additional PIPE financing.
  • BOC YAC agreed to provide backstop financing of up to $45 million, in cash, securities, or both, if needed to meet the required $150 million minimum investment condition at closing.
  • The transaction requires at least $150 million of cash and securities at closing, after applicable redemptions, including the trust account contribution, the BOC initial investment, and additional financing.
  • Yellowstone must have at least $5,000,001 of tangible net assets and no more than $2.5 million of indebtedness immediately before closing.
  • The filing provides no clear values for revenue, net income, operating cash flow, margins, total debt, or liquidity beyond the transaction financing amounts described above.

Material Changes Versus the Prior Comparable Period

No period-over-period financial comparison is presented. The material development is the signing of the proposed business combination and related financing arrangements.

  • Yellowstone and Sky entered into the Equity Purchase Agreement, approved unanimously by their respective boards.
  • Sky’s existing equityholders agreed to vote in favor of the transaction.
  • At closing, Yellowstone would contribute available trust account proceeds, subject to redemptions, deferred underwriting commissions, transaction expenses, and other specified deductions, in exchange for Sky common units.
  • Existing Sky equityholders would receive PubCo Class B common stock with voting rights but no economic rights, while Yellowstone stockholders would hold PubCo Class A common stock.
  • Existing Yellowstone warrants would convert into warrants to purchase PubCo Class A common stock on substantially the same terms.

Guidance, Outlook, Risks, Contingencies, and Unusual Items

  • Closing was subject to Yellowstone stockholder approval, completion of the $80 million Bond Financing, satisfaction of the $150 million minimum investment condition, Nasdaq listing, specified representations and covenants, and other customary conditions.
  • Either party could generally terminate the agreement if closing had not occurred by March 31, 2022. The agreement also provided termination rights for failure to complete the Bond Financing, legal prohibition, mutual consent, or uncured material breach. No termination fee was required.
  • The BOC $55 million investment would remain Series B preferred units of Sky if the business combination did not close.
  • The proposed Tax Receivable Agreement would generally require PubCo to pay applicable holders 85% of realized or deemed tax savings arising from specified tax attributes and related deductions.
  • Key risks include failure to obtain stockholder approval, failure to complete the Bond Financing or other financing, excessive redemptions, inability to maintain Nasdaq listing, transaction costs, legal proceedings, disruption to operations, competitive and economic pressures, and failure to realize expected benefits.
  • Sky Harbour Capital LLC expected to raise capital through a municipal bond offering. The filing cautions that projections in the preliminary offering statement relate only to the bond obligated group and should not be relied upon for an investment decision regarding Yellowstone or Sky.

Most Important Facts for Investors to Verify

  1. Whether the $80 million private activity bond financing was completed and on what terms.
  2. The final amount available from the trust account after stockholder redemptions, deferred underwriting commissions, and transaction expenses.
  3. Whether the approximately $100 million PIPE financing was raised and the resulting ownership dilution.
  4. Whether the $45 million backstop was required, funded, and provided in cash, securities, or a combination.
  5. Whether all closing conditions, including the $150 million minimum investment, Yellowstone’s tangible net asset and debt thresholds, stockholder approval, and Nasdaq listing, were satisfied.
  6. The final capitalization, voting rights, economic ownership, warrant terms, and obligations under the Tax Receivable Agreement.
  7. The financial statements, operating metrics, projections, and risk disclosures to be provided in the subsequent proxy statement and other transaction filings.