FLYEXCLUSIVE INC. current report, 17 October 2022

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Business Context and Reporting Period

Registrant: EG Acquisition Corp., a special purpose acquisition company. The Form 8-K was filed on October 18, 2022, regarding events occurring on October 17, 2022. EG announced a definitive equity purchase agreement with LGM Enterprises, LLC and its existing equityholders to combine the businesses and rename the public company flyExclusive, Inc.

The proposed transaction would create an umbrella partnership–C corporation structure. Substantially all operating assets would be held by LGM, while the public company would hold its equity interests in LGM.

Key Financial and Transaction Metrics

  • Bridge financing: LGM borrowed $50 million under a senior subordinated convertible note bearing interest at 10% per year and agreed to issue an additional $35 million of notes, for an intended aggregate principal amount of $85 million.
  • Bridge note conversion: At closing, the notes are expected to convert automatically into PubCo Class A common stock based generally on the amount owed divided by $10.00 per share, subject to specified adjustments.
  • Use of proceeds: Primarily the acquisition of additional aircraft and related expenses.
  • Transaction funding: EG would contribute the trust account balance, net of shareholder redemptions and deferred underwriting commissions, plus any PIPE proceeds and the deemed Bridge Note proceeds, less transaction expenses.
  • Secondary repurchase option: If the closing cash contribution exceeds $85 million, LGM’s existing equityholders may require repurchase of certain units at $10 per unit, subject to tiered maximum amounts of up to $15 million or $20 million depending on the contribution level.
  • Tax receivable agreement: PubCo would generally pay eligible holders 85% of realized or deemed tax savings attributable to specified tax attributes.

The filing does not provide operating revenue, profit, cash flow, margin, debt, or liquidity metrics for LGM or the combined company. The disclosed $85 million Bridge Note amount is transaction financing and does not represent total company debt or liquidity.

Material Changes Versus the Prior Comparable Period

  • EG entered into a definitive agreement to acquire and combine with LGM; the transaction had not closed as of the filing date.
  • EG would change its name to flyExclusive, Inc. and issue Class B voting shares with no economic rights to LGM’s existing equityholders.
  • Existing EG warrants would convert into warrants to purchase PubCo Class A common stock on substantially equivalent terms.
  • LGM obtained or arranged $85 million of convertible Bridge Note financing, subject to completion of the additional $35 million issuance.

Guidance, Outlook, Risks, Contingencies, and Unusual Items

  • Closing deadline: The agreement may be terminated if closing has not occurred by May 28, 2023, or, if approved, by an extended deadline no later than September 28, 2023.
  • Closing conditions: Conditions include EG stockholder approval, required regulatory clearances, continued NYSE listing, satisfaction of representations and covenants, absence of a continuing material adverse effect, and EG maintaining at least $5,000,001 of tangible net assets immediately before closing.
  • Redemptions and financing risk: The amount ultimately available depends on trust-account funds, shareholder redemptions, PIPE financing, Bridge Note proceeds, deferred underwriting commissions, and transaction expenses.
  • Termination: The agreement contains customary termination rights, and no termination fee or expense reimbursement is required upon termination.
  • Regulatory and execution risks: Risks include failure to obtain stockholder or governmental approvals, failure to maintain exchange listing, inability to close before the deadline, litigation, disruption to LGM’s operations or employee retention, and volatility in the competitive and regulated aviation industry.
  • Disclosure status: EG stated that it intended to file a preliminary proxy statement and subsequently mail definitive proxy materials. The transaction was not an offer to sell securities or a solicitation of an offer outside the applicable proxy and securities-law process.

Most Important Facts for Investors to Verify

  1. Whether EG stockholders approve the Business Combination and how many shares are redeemed.
  2. The final trust-account balance, PIPE proceeds, Bridge Note proceeds, transaction expenses, and deferred underwriting commissions used to calculate the closing contribution.
  3. Whether the planned additional $35 million of Bridge Notes is issued and the resulting shares issued upon conversion.
  4. Whether all closing conditions, including regulatory approvals, NYSE listing, and the $5,000,001 tangible-net-asset requirement, are satisfied.
  5. The final ownership, voting, dilution, warrant, and governance terms of flyExclusive, Inc.
  6. The financial condition and operating performance of LGM, including revenue, profitability, cash flow, aircraft acquisition plans, and total debt, which are not presented in this 8-K.