Business Context and Reporting Period
Company: Repay Holdings Corporation (formerly Thunder Bridge Acquisition Ltd.)
Reporting Date: July 11, 2019
Event: Completion of a Business Combination (Merger) between Thunder Bridge Acquisition Ltd. and Hawk Parent Holdings LLC (Repay). Thunder Bridge domesticated into a Delaware corporation and changed its name to Repay Holdings Corporation. The combined company began trading on the NASDAQ under the symbols "RPAY" (Class A common stock) and "RPAYW" (warrants).
Key Financial Metrics and Capital Structure
Transaction Consideration:
- Total Merger Consideration: Approximately $580.7 million.
- Net Proceeds to Pre-Merger Repay Equity Holders: Approximately $481.3 million (consisting of ~$260.8 million in cash and 22.0 million Post-Merger Repay Units).
- Total Facility Size: $230.0 million.
- Term Loan (Funded): $170.0 million senior secured term loan.
- Delayed-Draw Term Loan: $40.0 million (available within nine months of closing).
- Revolving Credit Facility: $20.0 million (includes $5.0 million sublimits for letters of credit and swingline loans).
- Interest Rates: LIBOR + 2.50% to 3.50% or Base Rate + 1.50% to 2.50%, based on leverage ratios.
- Covenants: Maximum consolidated total net leverage ratio of 5.50 to 1.00, reducing to 3.50 to 1.00 by September 30, 2022.
- PIPE Financing: $135.0 million raised from private investors for 13,500,000 shares at $10.00 per share.
- Public Share Redemptions: 7,019,741 shares redeemed at ~$10.33 per share, totaling ~$72.5 million.
- Trust Account Balance: Approximately $194.0 million immediately prior to closing (after redemptions).
- Cash sources included the Trust Account balance, net debt proceeds (~$70.6 million), and PIPE proceeds ($135.0 million).
- Uses included transaction expenses, a $50.0 million payment to Repay for general corporate purposes, warrant holder payments, transaction bonuses, and the cash component of merger consideration.
The filing does not provide specific revenue, profit, or cash flow metrics for the reporting period. Historical financial data and pro forma information are incorporated by reference from the Proxy Statement/Prospectus and Exhibit 99.2.
Material Changes and Agreements
Exchange Agreement: Repay Unitholders may exchange Post-Merger Repay Units for Class A common stock on a one-for-one basis starting six months after closing. The Company may elect to pay cash in lieu of shares based on the volume-weighted average price.
Tax Receivable Agreement (TRA): The Company entered into a TRA to pay Repay Unitholders 100% of the tax benefits realized from basis increases upon unit exchanges.
- Liability Estimate: If terminated immediately post-closing, the estimated payment obligation is approximately $128.6 million.
- Risk: Payments are substantial and could materially negatively impact liquidity if they exceed actual cash tax savings or if distributions from Repay are insufficient.
- Corsair: Granted rights to nominate directors (2 designees if owning >12%, 1 if owning >5%) and information access rights.
- Sponsor: Granted rights to nominate one independent director (audit committee qualified) if owning >5%.
- Founders: John Morris (CEO) and Shaler Alias (President) serve as directors. Rights to nominate an independent director if they cease to serve as officers.
- Exercise price adjusted to $11.50 per whole share (or $2.875 per quarter share).
- Public warrant holders received a $1.50 cash payment per warrant in exchange for the reduction in shares exercisable.
Guidance, Risks, and Contingencies
Forward-Looking Statements: The filing contains forward-looking statements regarding future financial results, market size, and growth strategies. Actual results may differ materially due to competitive landscape changes, regulatory shifts, and execution risks.
Key Risks:
- Indebtedness: The $170 million term loan creates significant leverage, potentially limiting flexibility to react to economic changes, obtain additional financing, or make acquisitions. Breach of covenants could lead to default and acceleration of debt.
- Liquidity: The Tax Receivable Agreement creates a substantial contingent liability that could strain cash flows.
- Internal Controls: The previous auditor (Warren Averett) reported material weaknesses in internal controls for 2016 and 2017, which were remediated as of December 31, 2018. Grant Thornton LLP is the new independent auditor.
Management anticipates that the Business Combination will provide the capital necessary to fund future acquisitions and pay down debt. The Company expects to account for tax basis increases as deferred tax assets, with associated TRA liabilities recorded as an increase to the liability due under the agreement.
Important Facts for Investor Verification
- Debt Covenants: Verify the Company's ability to maintain the maximum consolidated total net leverage ratio of 5.50 to 1.00 and subsequent reductions.
- Tax Receivable Agreement Liability: Monitor the estimated $128.6 million TRA liability and the timing of potential cash outflows relative to actual tax savings.
- Unit Exchange Mechanics: Track the volume of Post-Merger Repay Units exchanged for Class A stock after the six-month anniversary, as this triggers TRA payments and dilution.
- Internal Controls: Confirm the continued effectiveness of remediated internal controls over financial reporting under the new auditor, Grant Thornton LLP.
- Shareholder Voting Power: Note the dual-class structure where Repay Unitholders hold Class V common stock with voting power tied to their unit holdings, currently representing approximately 40% of total voting power.