Business Context and Reporting Period
This Form 8-K was filed by Fortress Transportation and Infrastructure Investors LLC on June 21, 2018. The filing reports the completion of a private exchange offer by the Company's indirect wholly owned subsidiary, Jefferson Investment Holdings LLC, to acquire interests in Jefferson Terminal, a developer of crude oil and refined product logistics assets.
Key Financial Metrics and Transaction Details
- Ownership Change: Prior to the transaction, the Company owned approximately 60% of Jefferson Terminal. Following the completion of the offer, the Company's ownership increased to approximately 80%, while affiliates of FIG LLC (Fortress) retained approximately 20%.
- Debt Context: The acquired interests were subordinate to approximately $300 million of intercompany shareholder debt incurring payment-in-kind interest compounding monthly at 12%.
- Securities Issued: The Company issued Class B Units of Jefferson Investment Holdings ("Newco Units") to Eligible Holders in exchange for their Jefferson Terminal interests.
- Exchange Ratio: Each Newco Unit is exchangeable for 0.7406 common shares of the Company. Full exchange of all Newco Units would result in the issuance of 1,920,605 common shares.
- Valuation: The filing states the value of the Offer was at a discount to the value of invested equity in Jefferson Terminal.
Material Changes Versus Prior Period
The primary material change is the consolidation of ownership in Jefferson Terminal. The Company increased its stake from approximately 60% to 80% by acquiring the remaining approximately 20% held by third-party Eligible Holders. This transaction provided liquidity to the Eligible Holders, whose prior interests were subordinate to significant intercompany debt.
Guidance, Outlook, and Risks
- Liquidity and Distributions: Holders of Newco Units are entitled to distributions equivalent to those paid on the Company's common shares. Jefferson Investment Holdings may satisfy these obligations in cash or via payment in kind (issuing additional Newco Units).
- Automatic Exchange: Newco Units will automatically exchange into common shares if the Company disposes of all interests in Jefferson Terminal or if Jefferson Investment Holdings is dissolved.
- Regulatory Status: The securities were issued without registration under the Securities Act of 1933, relying on Section 4(a)(2) and Rule 506 of Regulation D exemptions. Participants were required to be accredited investors.
- Financial Metrics: The filing text does not provide specific revenue, profit, cash flow, or margin figures for the Company or Jefferson Terminal.
Key Facts for Investor Verification
- Verify the impact of the increased 80% ownership stake on consolidated financial statements and earnings per share.
- Assess the implications of the $300 million intercompany debt with 12% payment-in-kind interest on Jefferson Terminal's leverage and cash flow.
- Monitor the potential dilution from the issuance of up to 1,920,605 common shares if Newco Units are exchanged.
- Confirm the valuation discount applied to the Offer relative to the invested equity in Jefferson Terminal.