Business Context and Reporting Period
Rimini Street, Inc. filed this Form 8-K on July 19, 2018, to report the closing of a private placement of securities and the simultaneous termination of its existing credit facility. The company is an emerging growth company incorporated in Delaware.
Key Financial Metrics and Transaction Details
- Cash Proceeds: The company received an aggregate of $133 million in cash proceeds from the private placement after deducting a $7 million original issue discount.
- Securities Issued: 140,000 shares of 13.00% Series A Redeemable Convertible Preferred Stock and 2,896,556 shares of Common Stock.
- Debt Repayment: The company used substantially all proceeds to repay $132.8 million in outstanding indebtedness and fees under its prior term loan financing agreement (Credit Facility).
- Debt Termination Costs: The repayment included a make-whole premium of approximately $7.3 million, plus principal, accrued interest, fees, and mandatory exit fees.
- New Obligations: The company issued convertible secured promissory notes with no principal amount outstanding at issuance, which collateralize potential future redemption payments on the Series A Preferred Stock.
Material Changes Versus Prior Period
The most significant change is the complete restructuring of the company's capital structure. The company terminated its Credit Facility, which had a maturity date of June 2020 and an aggregate commitment of up to $125.0 million (with $17.5 million previously undrawn). This facility has been replaced by the new equity and preferred stock issuance and the associated secured promissory notes.
Outlook, Risks, and Unusual Items
- Expected Charge: The company expects to incur a charge for the write-off of debt discount and issuance costs of up to approximately $48 million in the third quarter of 2018.
- Management Commentary: Management anticipates benefits from the transaction including projected cash savings over the next three years and accelerated growth.
- Risks and Contingencies: Forward-looking statements are subject to risks including the outcome of litigation with Oracle, the ability to raise additional financing, competitive pricing, and general economic conditions. The company disclaims any obligation to update these statements.
- Unusual Items: The transaction involved a complex mix of preferred stock, common stock, and secured notes with no initial principal balance, specifically designed to collateralize future redemption obligations.
Investor Verification Checklist
- Verify the specific terms of the 13.00% Series A Redeemable Convertible Preferred Stock in the Certificate of Designations (Exhibit 3.1).
- Confirm the exact amount of the $48 million charge expected in Q3 2018 and its impact on net income.
- Review the Registration Rights Agreement (Exhibit 10.1) to understand resale rights for the new investors.
- Assess the potential dilution impact of the 2,896,556 shares of Common Stock and the conversion features of the Preferred Stock.
- Monitor the status of the Oracle litigation, as refunds from this matter are cited as a material risk factor.