Business Context and Reporting Period
This Form 8-K filing by NextDecade Corporation, dated August 3, 2018, reports the entry into material definitive agreements regarding a Series A Convertible Preferred Stock Offering. The filing details agreements with HGC NEXT INV LLC and backstop purchasers (York Capital Management, Valinor Management, and Halcyon Capital Management) to raise capital for the Company's Rio Grande LNG Project.
Key Financial Metrics and Transaction Terms
- Total Offering Size: Approximately $50 million in aggregate proceeds (increased from a prior target of $35 million).
- HGC Offering: $35 million in Series A Convertible Preferred Stock.
- Backstop Offering: Approximately $15 million total ($9.94 million from York, $3.41 million from Valinor, $1.65 million from Halcyon).
- Purchase Price: $1,000 per share of Series A Preferred Stock.
- Dividend Rate: 12% per annum, cumulative, payable in cash or in-kind (Company anticipates in-kind).
- Warrants: Detached warrants issued with a $0.01 strike price. HGC receives rights to 0.50% of fully diluted common stock; Backstop Purchasers receive rights to approximately 0.21% in aggregate.
- Origination Fees: 2% of shares purchased (700 shares to HGC; 300 shares aggregate to Backstop Purchasers).
- Additional Fees: Backstop Purchasers to receive approximately 328,000 common shares as "Backstop Fees" and 86,000 common shares as "Drawdown Fees."
Material Changes and Agreements
The filing reports an amendment to the Backstop Commitment Agreements to reflect the increase in targeted aggregate proceeds from $35 million to $50 million. Additionally, the Company entered into a Purchaser Rights Agreement with HGC, granting HGC the right to appoint one director (increasing the Board size from 11 to 12) and a right of first refusal to purchase up to $350 million of equity or equity-linked securities related to the Rio Grande LNG Project.
Guidance, Outlook, and Risks
- Conversion Terms: The Company has the option to convert Series A Preferred Stock to Common Stock at $7.50 per share if the volume-weighted average trading price exceeds 175% of the conversion price for 60 of the prior 90 trading days. Mandatory conversion occurs upon a "FID Event" or on the 10th anniversary.
- Future Issuances: The Company is permitted to issue up to $50 million of Series B Preferred Stock with pari passu priority without Series A holder approval, subject to stockholder approval for the authorization.
- Closing Dates: The HGC Offering is expected to close on or before August 30, 2018. The Backstop Purchaser Offering is expected to close on August 9, 2018.
- Risk Disclosure: The securities are unregistered and may not be offered or sold in the United States absent registration or an applicable exemption.
Investor Verification Checklist
- Verify the actual closing dates of the HGC and Backstop Offerings against the expected dates of August 30 and August 9, 2018.
- Confirm the final number of Series A Preferred Shares issued and the specific calculation of the 12% in-kind dividends.
- Review the impact of the new Board member appointment on corporate governance and voting dynamics.
- Monitor the Company's stock price relative to the $7.50 conversion price to assess the likelihood of early conversion.
- Check for any subsequent filings regarding the issuance of the permitted $50 million Series B Preferred Stock.