Reservoir Media, Inc. Form 8-K Summary
Filing date: July 28, 2021. The filing reports the completion of Reservoir Media’s business combination with Roth CH Acquisition II Co. (“ROCC”), formerly a SPAC. ROCC was renamed Reservoir Media, Inc. (“RMI”), and Reservoir Holdings, Inc. became a wholly owned subsidiary. The filing also provides Form 10-level information because ROCC was a shell company before closing.
Business context and reporting period
- The business combination closed on July 28, 2021, following stockholder approval on July 27, 2021.
- RMI’s common stock and warrants were expected to begin trading on Nasdaq under RSVR and RSVRW, respectively, on July 29, 2021, subject to listing review.
- The historical financial information relates to Reservoir Holdings, including audited fiscal years ended March 31, 2021 and 2020.
- Unaudited pro forma condensed combined financial information is provided as of March 31, 2021 and for the three months ended March 31, 2021 and year ended December 31, 2020.
Transaction, capital structure, debt and liquidity
| Metric | Disclosure |
|---|---|
| Merger consideration | 44,714,705 RMI shares issued to former Reservoir Holdings stockholders. |
| Former Reservoir Holdings ownership | Approximately 69.8% of RMI following the combination. |
| PIPE financing | 15,000,000 shares issued at $10.00 per share for gross proceeds of $150.0 million. |
| ROCC redemptions | 10,295,452 shares redeemed at approximately $10.00 per share, totaling approximately $103.0 million. |
| PIPE placement fees | Approximately $5.8 million paid to placement agents. |
| Shares outstanding | 64,069,253 RMI common shares immediately following closing. |
| Senior Credit Facility | $248.75 million senior secured revolving facility, maturing October 16, 2024. |
| Interest rate | Base rate plus 1.25% or LIBO rate plus 2.25%; unused commitments incur a 0.25% annual fee. |
| Collateral and guarantees | RMI, Reservoir Holdings and certain subsidiaries guarantee the facility. Substantially all tangible and intangible assets of the guarantors are pledged. |
| Financial covenants | Maximum total leverage ratio of 6.00:1.00, minimum fixed charge coverage ratio of 1.25:1.00 and consolidated senior debt-to-library value ratio of 0.55, subject to adjustments. |
The filing does not provide current revenue, net income, operating margin, cash flow, cash balance, or post-closing net debt figures. Those amounts are either incorporated by reference or included in the separate pro forma and historical financial statements.
Material changes versus the prior comparable period
- The principal change is transformational rather than operational: the SPAC acquired Reservoir Holdings and ceased to be a shell company.
- RMI completed a debt refinancing and obtained a $248.75 million revolving facility to fund refinancing costs, music publishing investments and general corporate purposes.
- RMI raised $150.0 million through the PIPE, while approximately $103.0 million of public-shareholder redemptions reduced available equity capital.
- The company adopted a new 2021 Omnibus Incentive Plan and converted outstanding Reservoir Holdings options into RMI options.
- ROCC’s prior directors and executive officers resigned. Golnar Khosrowshahi became Chief Executive Officer, Rell Lafargue became President and Chief Operating Officer, and Jim Heindlmeyer became Chief Financial Officer.
Guidance, outlook, risks and unusual items
- No quantitative revenue, earnings, margin, cash flow or other operating guidance is provided in the filing.
- Management identifies anticipated benefits from the combination, growth initiatives, acquisitions and music publishing investments as forward-looking matters, but provides no new numerical outlook.
- Key risks include failure to realize transaction benefits, competition, profitable growth, retention of key employees, acquisition and investment execution, limited liquidity or trading volume, geopolitical and regulatory changes, litigation, economic conditions and COVID-19 impacts.
- Debt covenant noncompliance could permit lenders, subject to cure rights, to require immediate repayment of amounts outstanding.
- The company expects to retain future earnings for operations and growth and does not expect to pay cash dividends for the foreseeable future.
- The filing states that RMI was not subject to any material pending legal or administrative proceedings as of the filing date, although litigation outcomes may vary materially from estimates.
Important facts for investors to verify
- Review the audited Reservoir Holdings financial statements and unaudited pro forma information incorporated by reference and filed as Exhibit 99.1.
- Verify the post-closing cash balance, borrowings, net debt, liquidity and actual utilization of the Senior Credit Facility.
- Assess compliance with the leverage, fixed-charge coverage and senior-debt-to-library-value covenants.
- Confirm the final Nasdaq listing status and trading commencement of RSVR and RSVRW.
- Review the full credit agreement for collateral, mandatory prepayments, interest-rate provisions, covenants and default remedies.
- Evaluate dilution from warrants, exchanged options, the equity incentive plan and any additional shares issuable under transaction agreements.
- Review the Proxy Statement’s risk factors, related-party transactions, lock-up provisions and registration rights.