Business Context and Reporting Period
This Form 8-K, dated April 1, 2021, reports the completion of a transformative transaction by Custom Truck One Source, Inc. (formerly Nesco Holdings, Inc.). On the Closing Date, the Company completed the acquisition of 100% of the partnership interests of Custom Truck One Source, L.P. ("CTOS") from affiliates of The Blackstone Group and other sellers. Concurrently, the Company executed a change in control, with Platinum Equity becoming the controlling shareholder. The Company's name was officially changed to Custom Truck One Source, Inc., and its NYSE ticker symbol changed from "NSCO" to "CTOS" effective April 5, 2021.
Key Financial Metrics and Capital Structure
The filing details the capital structure established to fund the acquisition and operations. Specific revenue, profit, or cash flow metrics for the reporting period are not provided in this document; however, the following capitalization figures are disclosed:
- Debt Financing:
- Senior Secured Notes: Issued $920 million in aggregate principal amount of 5.50% senior secured second lien notes due 2029.
- ABL Facility: Established a $750 million first lien senior secured asset-based revolving credit facility with a maturity of five years (April 1, 2026).
- Equity Financing:
- Subscription (Platinum): Issued 148,600,000 shares of Common Stock to Platinum at $5.00 per share (aggregate purchase price range of $700 million to $763 million).
- Supplemental Equity Financing (PIPE): Issued 28,000,000 shares to PIPE Investors at $5.00 per share for an aggregate purchase price of $140 million.
- Rollovers: Issued 20,100,000 shares to sellers contributing equity interests valued at $100.5 million.
- Corporate Advisory Fees: Agreed to pay $5 million annually for 2021-2023, $2.5 million for 2024, and $1.25 million annually thereafter to Platinum Equity Advisors, LLC.
Material Changes Versus Prior Period
The filing represents a fundamental shift in the Company's corporate structure and ownership:
- Change in Control: Control shifted from Energy Capital Partners (ECP) to Platinum Equity.
- Board Composition: The Board was reconstituted to 11 directors. Platinum has the right to designate up to seven nominees (three required to be independent). Previous directors, including the former CEO Lee Jacobson, resigned.
- Executive Leadership: Fred Ross was appointed CEO, Ryan McMonagle as President and COO, and Bradley Meader as CFO, effective on the Closing Date.
- Corporate Identity: The Company changed its name from Nesco Holdings, Inc. to Custom Truck One Source, Inc.
Guidance, Outlook, Risks, and Contingencies
The filing does not contain forward-looking financial guidance or revenue outlooks. However, it outlines significant contractual obligations and risks:
- Restrictive Covenants: The Indenture and ABL Credit Agreement impose strict limitations on incurring additional debt, paying dividends, making distributions, creating liens, and engaging in mergers or asset sales.
- Financial Covenants: The ABL Facility includes a springing financial covenant requiring a Consolidated Fixed Charge Coverage Ratio of at least 1.00 to 1.00, triggered only if Specified Excess Availability falls below the greater of 10% of the Line Cap or $60 million.
- Stockholder Rights: Platinum holds significant consent rights over major corporate actions (e.g., change in control, asset acquisitions over $50 million, hiring/firing of C-suite) while owning 30% or more of the stock.
- Lockup Period: Platinum is subject to an 18-month lockup period with limited exceptions, including a "Trigger Price" of $8.00 per share for certain transactions.
- Events of Default: Standard events of default are defined for both the Notes and the ABL Facility, including non-payment, covenant breaches, and bankruptcy, which could lead to immediate acceleration of debt.
Important Facts for Investor Verification
- Verify the pro forma financial statements and capitalization table, which are not included in this filing but are required to be filed in an amendment.
- Confirm the specific amount of the Subscription purchase price paid by Platinum, as the filing states a range ($700 million to $763 million) dependent on total equity funding required.
- Monitor the "Trigger Price" of $8.00 per share, which affects Platinum's ability to sell shares or vote on change of control transactions during the 18-month lockup period.
- Review the borrowing base calculation for the $750 million ABL facility to understand the Company's immediate liquidity availability based on eligible accounts and inventory.
- Assess the impact of the $5 million annual advisory fee payable to Platinum Equity Advisors on future operating expenses.