Sachem Capital Corp. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated October 31, 2019, details a material definitive agreement entered into by Sachem Capital Corp. (the "Company"). The Company is a business development company incorporated in New York. The report focuses on a new debt offering consummated on November 7, 2019.
Key Financial Metrics and Transaction Details
- Debt Issuance: The Company agreed to sell $30,000,000 aggregate principal amount of 6.875% Notes due 2024 ("Firm Notes"), plus an additional $4,500,000 to cover underwriter overallotments ("Additional Notes").
- Net Proceeds: Upon consummation, the Company expects to realize net proceeds of $28,950,000 after deducting underwriting discounts and commissions of $1,050,000 (excluding other expenses).
- Interest Rate: The Notes bear interest at 6.875% per annum, payable quarterly in arrears.
- Maturity Date: The unpaid principal balance and accrued interest are payable in full on December 30, 2024.
- Underwriting Discount: The underwriters purchased the Notes at a 3.5% discount to the public offering price.
- Liquidity and Capital Structure: The Notes are unsecured, unsubordinated obligations ranking equally with existing senior unsecured indebtedness. They are structurally subordinated to subsidiary indebtedness.
Material Changes and Covenants
The filing does not provide comparative financial metrics (revenue, profit, cash flow) for the period. The primary material change is the incurrence of new senior debt. Key covenants and terms include:
- Asset Coverage Ratio: The Company must maintain an Asset Coverage Ratio of at least 150% (total assets to aggregate indebtedness) to pay dividends, make distributions, incur additional indebtedness, or purchase capital stock.
- Dividend Limitation: Dividends or distributions cannot exceed 90% of taxable income unless the Asset Coverage Ratio requirement is met.
- Redemption: The Company may redeem the Notes in whole or in part on or after November 7, 2021, at 100% of the outstanding principal amount plus accrued interest.
- Defeasance: The Notes are subject to defeasance by the Company upon depositing sufficient cash or government securities with a trustee.
Guidance, Outlook, and Risks
The filing does not contain forward-looking guidance on revenue or earnings. The primary risks and contingencies relate to the new debt obligation:
- Subordination Risk: The Notes are effectively subordinated to all existing and future secured indebtedness.
- Covenant Compliance: Failure to maintain the 150% Asset Coverage Ratio could restrict the Company's ability to pay dividends or incur further debt.
- Market Listing: The Notes are approved for listing on the NYSE American LLC under the symbol "SACC" and were expected to begin trading on or about November 12, 2019.
Investor Verification Checklist
- Verify the final closing date and actual net proceeds received after all expenses.
- Confirm the Company's current Asset Coverage Ratio to assess compliance with the 150% covenant.
- Review the full text of the Underwriting Agreement (Exhibit 1.1) and Indenture (Exhibit 4.1) for specific events of default.
- Monitor the trading status of the "SACC" notes on the NYSE American LLC.
- Assess the impact of the new $30M+ debt load on the Company's overall leverage and ability to service existing debt.