Reservoir Media, Inc. current report, 14 April 2021

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Business Context and Reporting Period

On April 14, 2021, Roth CH Acquisition II Co. (ROCC), a special purpose acquisition company, Reservoir Holdings, Inc. and ROCC’s merger subsidiary entered into a definitive Agreement and Plan of Merger. The transaction would combine ROCC and Reservoir, with Reservoir becoming a wholly owned subsidiary of ROCC. The filing is a current report describing the proposed transaction; it does not provide a period-end operating or financial results update for Reservoir.

Following closing, ROCC is expected to change its name to Reservoir Media, Inc., subject to stockholder approval and other closing conditions.

Key Financial and Transaction Metrics

  • Effective Time Enterprise Valuation: $637.5 million, plus the purchase price of qualifying interim acquisitions, less related permitted acquisition indebtedness.
  • Transaction consideration: Calculated using the enterprise valuation, Company option exercise prices and closing net indebtedness. Shares issued as merger consideration are valued at $10.00 per share for purposes of calculating the total consideration share amount.
  • PIPE financing: $150.0 million of ROCC common stock at $10.00 per share, subject to customary closing conditions and the substantially concurrent completion of the merger.
  • PIPE expenses: Approximately $5.8 million of offering-related expenses, including placement-agent fees.
  • Minimum cash condition: Reservoir must receive at least $125.0 million of available closing-date cash.
  • Debt refinancing: Truist committed to arrange and underwrite refinancing of Reservoir subsidiary RMM’s existing senior secured revolving credit facility in an aggregate amount of up to $248.75 million. Final financing terms had not been completed and may differ.
  • Interim acquisition indebtedness: Permitted acquisition indebtedness is capped at $150.0 million for purposes of the merger agreement.
  • Operating metrics: The filing text does not provide clear historical revenue, profit, cash flow, margin, debt-balance or liquidity values for Reservoir. It references projected EBITDA, adjusted EBITDA, EBITDA margin and revenue in attached materials, but those figures are not included in the provided filing text.

Material Changes Versus the Prior Comparable Period

The filing does not report comparable-period operating results or quantify changes in revenue, earnings, cash flow, margins or balance-sheet items. The material development is the execution of the merger agreement, related financing arrangements and associated governance, registration and lock-up agreements.

Guidance, Outlook, Risks and Unusual Items

  • Closing conditions: Completion requires, among other things, ROCC stockholder approval, satisfaction of antitrust waiting periods, Nasdaq listing approval, completion of the PIPE financing, completion or approval of the debt refinancing, an effective registration statement, and compliance with minimum cash and net tangible asset requirements.
  • Timing: Either party may generally terminate if the merger is not completed by October 14, 2021, subject to the agreement’s exceptions. The PIPE subscription agreements generally terminate no later than October 13, 2021.
  • Shareholder and governance matters: ROCC stockholders will vote on the business combination, amended charter, equity compensation plan, potential Nasdaq issuance approval, director elections and related proposals. Existing ROCC directors and officers are expected to resign at closing, with designated post-closing directors appointed.
  • Lock-ups: Lock-up parties agreed to restrictions on transfers of merger consideration shares and related securities. Generally, 50% is restricted for up to 180 days or until a specified $12.50 trading-price condition is met, while the remaining 50% is restricted for 180 days, subject to exceptions.
  • Termination and execution risk: The merger could fail or be delayed because of inadequate stockholder approval, excessive redemptions, failure to secure financing, failure to meet minimum cash requirements, regulatory issues, adverse changes or breaches of the agreement.
  • Business risks: Management identified risks involving Reservoir’s future revenues, liquidity, cash flows, acquisitions, competition, operating performance, COVID-19 effects, legal proceedings, transaction costs and the ability to realize anticipated benefits.
  • Non-GAAP information: EBITDA, adjusted EBITDA and EBITDA margin referenced in the filing are unaudited, non-GAAP measures without standardized definitions and may differ from measures used by other companies or in future SEC filings.
  • Unusual items: The filing includes a proposed SPAC merger, $150.0 million PIPE financing and a committed debt refinancing rather than recurring operating results. The debt commitment letter was subject to conditions and had not been replaced by final loan documentation.

Important Facts for Investors to Verify

  1. Review the definitive proxy statement and registration statement for Reservoir’s historical financial statements, projections, reconciliation of non-GAAP measures and updated transaction terms.
  2. Verify the final share count, exchange ratio, dilution from options, PIPE shares, redemptions and any interim acquisitions or acquisition debt.
  3. Confirm whether the $125.0 million minimum cash condition and the ROCC $5,000,001 net tangible asset condition are satisfied at closing.
  4. Review final terms, interest rates, maturities, covenants and availability under the proposed refinancing of up to $248.75 million.
  5. Confirm stockholder, Nasdaq, antitrust and SEC registration approvals and whether the merger closes by the applicable October 2021 deadlines.
  6. Assess the actual historical and projected revenue, EBITDA, adjusted EBITDA, margins, cash flow, net debt and liquidity of Reservoir using the subsequent SEC filings and attached investor materials.