Business Context and Reporting Period
This Form 8-K was filed by AFC Gamma, Inc. (the filing entity; the request metadata refers to Advanced Flower Capital Inc.) on October 28, 2021. The disclosure concerns a proposed senior notes offering and related amendments to the company’s revolving credit facility. No quarterly or annual operating results are reported.
Financing and Key Terms
- The company entered into a purchase agreement for the issuance of $100 million aggregate principal amount of 5.750% senior notes due 2027.
- The notes are being offered to qualified institutional buyers under Rule 144A and to non-U.S. persons under Regulation S.
- The offering was expected to close on November 3, 2021, subject to customary closing conditions.
- Estimated net proceeds are approximately $97 million after initial purchaser discounts and commissions and estimated offering expenses.
- Chief Executive Officer and director Leonard M. Tannenbaum agreed to purchase approximately $22.4 million principal amount of the notes indirectly through an investment vehicle in a resale transaction with the initial purchasers.
Revolving Credit Facility
Upon or immediately after completion of the offering, the company intended to amend its revolving credit agreement with AFC Finance, LLC. The proposed amendments included:
- Reducing the interest rate to 4.75% per annum.
- Extending maturity to the earlier of September 30, 2022, or the closing date of a replacement, refinancing, or refunding credit facility.
- Increasing aggregate revolving commitments to $75 million.
- Adding a 0.25% per annum unused fee on undrawn commitments.
- Adding a one-time commitment fee equal to 0.25% of total revolving commitments, payable in three quarterly installments beginning in the first quarter of 2022.
- Giving noteholders, following specified events of default and subject to applicable conditions, an option to purchase all outstanding obligations under the amended revolving facility.
- Requiring interest, commitment fees, and unused fees to be paid to a charity designated by AFC Finance, LLC, net of applicable taxes.
Material Changes, Outlook, and Risks
The filing does not provide revenue, profit, cash flow, margin, asset, dividend, or liquidity metrics for a comparable prior period. The principal material change is the planned addition of $100 million of senior debt, together with a proposed increase in revolving commitments to $75 million and related changes to borrowing costs and maturity.
AFC Finance, LLC is wholly owned by Leonard M. Tannenbaum and Jonathan Kalikow, both company directors, creating an affiliated-party financing arrangement. The offering and credit-facility amendment remained subject to closing or execution conditions, and the filing does not confirm that either transaction was completed as of October 28, 2021.
The Item 7.01 information is furnished rather than filed for purposes of Section 18 of the Exchange Act and is not incorporated by reference into other filings unless expressly stated.
Investor Verification Items
- Verify whether the senior notes offering closed on or about November 3, 2021 and confirm the final net proceeds.
- Confirm the final terms and execution of the revolving credit facility amendment, including the $75 million commitment and September 30, 2022 maturity provision.
- Review the final notes indenture for interest payment, covenants, events of default, and noteholder purchase rights.
- Assess the affiliated-party nature of the revolving facility and the CEO’s approximately $22.4 million note purchase.
- Determine how the additional debt affected subsequent leverage, liquidity, interest expense, and covenant compliance.