Bridger Aerospace Group Holdings, Inc. current report, 17 November 2023

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Bridger Aerospace Group Holdings, Inc. — Form 8-K Summary

Reporting period and context: Current report dated November 17, 2023, with subsequent events reported on November 21, 2023. Bridger Aerospace Group Holdings, Inc. provides aerial firefighting services and is listed on Nasdaq under BAER and BAERW.

Material Definitive Agreement

  • On November 17, 2023, Bridger entered into a Services Agreement with a subsidiary of MAB Funding, LLC, a joint venture owned by funds managed by Marathon Asset Management, Avenue Sustainable Solutions Fund, and Bridger.
  • MAB Funding is expected to purchase four Canadair CL-215T amphibious aircraft from the Government of Spain for €40.3 million, with closing expected within ten business days of November 17, 2023.
  • Bridger will manage return-to-service upgrades, maintenance, and overhaul work. The aircraft owner will reimburse Bridger for related costs and expenses.
  • The parties agreed to negotiate operating leases under which Bridger could lease aircraft after they return to service.

Purchase Options and Financial Obligations

  • Bridger may purchase aircraft 1 and 2 for an aggregate $40.0 million during the first 18 months of the Services Agreement.
  • If Bridger completes that purchase, it may purchase aircraft 3 and 4 during the first 36 months. The price is subject to a complex formula that includes acquisition costs, return-to-service costs, lease payments, and a 22.8% annual interest rate compounded monthly, with an alternative return-based pricing provision.
  • If Bridger does not purchase the aircraft within the specified periods, the parties may initiate a third-party sales process. Bridger may owe a cash fee capped at $15 million if third-party sale proceeds are below the applicable purchase-option consideration, or $15 million if the aircraft are neither sold nor leased to a third party.
  • If the Owner terminates for specified Bridger defaults, including uncured material breach, certain debt defaults, bankruptcy, or insolvency-related actions, Bridger must pay a $15 million termination fee.

Restrictions and Governance Rights

  • Marathon and Avenue receive non-voting observer rights for Bridger’s board and committees during the agreement term.
  • Bridger is restricted from acquiring, leasing, or operating new Super Scooper or other firefighting aircraft, subject to existing aircraft owned or leased by the Company and its subsidiaries.
  • Bridger and its subsidiaries are restricted from using cash or cash equivalents to purchase other equity interests, assets, or properties.
  • Subject to existing debt obligations, net cash proceeds from specified equity issuances, non-ordinary-course asset sales, certain indebtedness exceeding $5 million, sale-leaseback transactions, and other fundamental corporate transactions must be applied to obligations under the Services Agreement.

Termination of Big Horn Airways Transaction

  • On November 21, 2023, Bridger and the owners of Big Horn Airways, Inc. mutually terminated the previously announced July 21, 2023 Purchase and Sale Agreement.
  • No termination fee is payable. Bridger agreed to reimburse Big Horn for transaction fees, but the amount was not estimable as of the filing.
  • The termination resulted from delays in consummating the proposed transaction.

Financial Metrics, Liquidity, and Outlook

The filing does not provide revenue, profit, cash flow, margin, debt-balance, liquidity, or period-specific financial results. It also does not provide formal financial guidance. The principal financial implications disclosed are the €40.3 million aircraft acquisition by the joint venture, Bridger’s $40.0 million option for two aircraft, potential purchase and lease obligations, cash-use restrictions, and possible fees of up to $15 million.

Key Risks and Unusual Items

  • The aircraft purchase by MAB Funding and the aircraft return-to-service work remain subject to completion and execution.
  • Bridger may be required to fund or incur substantial aircraft-related purchase, lease, maintenance, or termination obligations.
  • The 22.8% compounded monthly interest provision could materially increase the price of a later purchase option.
  • The Services Agreement may constrain Bridger’s aircraft expansion strategy and restrict the use of proceeds from specified financing and asset-sale transactions.
  • Marathon holds certain Bridger bonds, and Avenue holds shares of Bridger Series A preferred stock, creating related-party and alignment considerations.
  • The Big Horn transaction termination may result in reimbursable costs of an amount not yet determinable.

Investor Verification Checklist

  • Confirm completion of MAB Funding’s €40.3 million acquisition of the four Spanish aircraft.
  • Review subsequent disclosures regarding aircraft return-to-service costs, operating leases, and Bridger’s purchase-option decisions.
  • Assess the potential effect of the 22.8% compounded monthly interest provision and the $15 million contingent fees.
  • Verify the amount of transaction fees reimbursed to Big Horn Airways.
  • Review Bridger’s debt agreements and liquidity to determine compliance with the Services Agreement’s proceeds and default provisions.