Business Context and Reporting Period
Rimini Street, Inc. filed this Form 8-K on July 8, 2021, reporting events occurring on July 2, 2021. The filing details the entry into a material definitive credit agreement and the subsequent initiation of a redemption process for the company's Series A Redeemable Convertible Preferred Stock.
Key Financial Metrics and Capital Structure
- New Debt Facility: Entered into a five-year senior secured term loan facility with an aggregate principal amount of $90.0 million.
- Interest Rates: Borrowings bear interest at LIBOR plus a margin of 1.75% to 2.50%, or a base rate plus a margin of 0.75% to 1.50%, subject to leverage-based step-downs.
- Preferred Stock Redemption: Approximately $88.4 million of the new loan proceeds are designated to fully redeem the 13.00% Series A Redeemable Convertible Preferred Stock.
- Financial Covenants:
- Maximum consolidated total net leverage ratio: 3.75 to 1.00.
- Minimum consolidated fixed charge coverage ratio: 1.25 to 1.00.
- Minimum average daily U.S. cash balance: $20.0 million.
Material Changes and Transactions
The primary material change is the restructuring of the company's capital structure through the issuance of new senior secured debt to eliminate existing preferred equity obligations. On July 8, 2021, the company delivered a notice of conditional redemption to holders of its Preferred Stock, scheduled for July 20, 2021. Upon successful redemption, the company will have no further payment obligations related to the secured convertible notes issued in connection with the Preferred Stock.
Outlook, Risks, and Contingencies
- Conditions Precedent: Funding of the $90.0 million Credit Facility is subject to the satisfaction of certain conditions precedent. The redemption of the Preferred Stock is contingent upon the receipt of funds from this facility or an alternative source.
- Covenants and Restrictions: The Credit Agreement imposes negative covenants limiting the company's ability to create liens, sell assets, engage in mergers, incur additional indebtedness, or pay dividends/repurchase stock, subject to exceptions.
- Collateral: The obligations are secured by a lien on substantially all assets of the Credit Parties.
- Events of Default: Includes non-payment, breach of covenants, bankruptcy, and change of control.
Investor Verification Checklist
- Verify the successful closing of the $90.0 million Credit Facility and the satisfaction of all conditions precedent.
- Confirm the execution of the Preferred Stock redemption on July 20, 2021, and the elimination of associated payment obligations.
- Monitor compliance with the new financial covenants, specifically the 3.75x net leverage ratio and $20.0 million minimum cash balance.
- Review the impact of the new debt service costs (interest rates) on future cash flows compared to the previous preferred stock dividend obligations.