Business Context and Reporting Period
This Form 8-K, dated March 31, 2023, reports the closing of the acquisition of a substantial majority of the assets and certain liabilities of American Advisors Group (AAG) by Finance of America Reverse LLC (FAR), an indirect subsidiary of Finance of America Companies Inc. (FOA). The transaction includes residential reverse mortgage loans and servicing rights under the FHA's Home Equity Conversion Mortgage program. The filing also details concurrent equity investments and executive leadership changes.
Key Financial Metrics and Transaction Details
The filing does not provide standard periodic financial metrics such as revenue, profit, cash flow, or margins for the reporting period. Instead, it details the financial structure of the AAG Transaction and Equity Investments:
- Acquisition Consideration: FAR paid AAG $5.5 million in cash and issued a promissory note with a principal amount of $4.5 million (reduced from an original $10 million cash consideration).
- Equity Issuance to AAG: FOA issued one share of Class B Common Stock to AAG. FOAEC issued 19,692,990 Class A Units to AAG, with the potential to issue up to 14,200,676 additional units (maximum total of 33,893,666 units), exchangeable for Class A Common Stock.
- Equity Investments: FOA issued 10,869,566 shares of Class A Common Stock to each of two investors (Blackstone Investor and BL Investor) for an aggregate purchase price of $15 million per investor ($30 million total).
- Use of Proceeds: Proceeds from the Equity Investments are designated for general corporate purposes and/or to fund the AAG Transaction.
Material Changes and Management Updates
The primary material change is the completion of the AAG Transaction, significantly expanding FOA's reverse mortgage portfolio. Additionally, the Board of Directors announced the following executive appointments effective April 5, 2023:
- Chief Executive Officer: Graham A. Fleming, previously President and interim CEO, was appointed CEO. No changes to his compensation were made.
- President: Kristen Sieffert, previously President of FAR, was appointed President of the Company. Her compensation was increased to an annual salary of $650,000, a target cash bonus of $1.2 million, and a target annual equity award of $1.25 million.
Guidance, Risks, and Contingencies
The filing contains forward-looking statements regarding the AAG Transaction and Equity Investments but does not provide specific financial guidance or outlook figures. Management cautions that actual results may differ materially due to risks described in the Company's 2022 Form 10-K. Financial statements of the acquired business and pro forma financial information are not included in this filing and will be submitted by amendment within 71 calendar days.
Investor Verification Checklist
- Verify the final terms of the AAG Transaction, specifically the $4.5 million promissory note and the conditions for issuing the additional 14,200,676 FOAEC Units.
- Review the upcoming amendment to this 8-K for the financial statements of AAG and pro forma financial information to assess the impact on FOA's balance sheet.
- Confirm the dilution impact of the 33,893,666 potential shares of Class A Common Stock issuable to AAG and the 21,739,132 shares issued to the Blackstone and BL investors.
- Monitor the integration of AAG's reverse mortgage servicing rights and loan portfolio into FOA's operations.