Business Context and Reporting Period
Filing: Form 8-K filed by Aurora Acquisition Corp. on December 1, 2021, reporting events dated November 30, 2021. Aurora was pursuing a proposed business combination with Better HoldCo, Inc., which was expected to result in Better Home & Finance Holding Company becoming a public company.
The filing reports amendments to the merger agreement and related financing arrangements. The transaction remained subject to shareholder, regulatory and other closing conditions; it had not closed as of the filing date.
Key Financial and Transaction Metrics
- The revised merger consideration will consist entirely of Aurora capital stock. The previously contemplated $950 million cash consideration to Better stockholders was removed; only cash in lieu of fractional shares is payable at closing.
- Better agreed to issue up to $750 million of convertible bridge notes, with SB Northstar LP purchasing up to $650 million and Novator Capital Sponsor Ltd. purchasing up to $100 million. The notes are intended to convert into Aurora Class A common stock at the business combination closing.
- SB Northstar’s equity subscription commitment was reduced from $1.5 billion to $750 million, subject to specified offsets and adjustments. SB Northstar also received a new commitment to fund up to $750 million of convertible notes, subject to specified reductions.
- The Sponsor agreed to purchase up to $100 million of convertible promissory notes, subject to reductions related to trust-account cash and other specified amounts. If required regulatory approvals for the debt are not obtained, the Sponsor’s equity commitment may instead be amended to approximately $166.7 million, subject to specified reductions.
- The Sponsor’s obligation to backstop public-shareholder redemptions was terminated.
- The filing does not provide Better’s revenue, net income, cash flow, operating margins, debt balances, cash balance or liquidity ratios for a comparable reporting period.
Material Changes Versus Prior Arrangements
- Merger consideration shifted from a combination of cash and stock to 100% stock consideration.
- The outside date for terminating the merger agreement was extended from February 12, 2022 to September 30, 2022, subject to extensions related to specified regulatory approvals.
- The parties agreed that the financing arrangements and related amendments would satisfy the merger agreement’s minimum available cash condition.
- The original $1.5 billion PIPE equity commitment was substantially restructured into a lower equity commitment plus potential convertible-note financing.
- The Sponsor’s original $200 million equity subscription was restructured primarily as a convertible-note commitment.
- The redemption backstop agreement was terminated, increasing exposure to the level of shareholder redemptions at closing.
Guidance, Outlook, Risks and Unusual Items
No formal revenue, earnings or cash-flow guidance is provided in this filing. The transaction financing and closing remain subject to definitive documentation, regulatory approvals, shareholder approval and other customary conditions.
- Convertible-note financing may not be available if state regulators or government-sponsored enterprises reject the transaction or do not approve the related debt.
- Better’s business is exposed to mortgage-market volatility, interest rates, residential real estate conditions, refinancing demand, loan production and servicing risks, liquidity needs and competition.
- Additional risks include regulatory compliance, fair-lending and consumer-protection requirements, data privacy and cybersecurity, dependence on government-sponsored enterprises, technology and infrastructure execution, personnel retention and the need for additional capital.
- Vishal Garg agreed to use reasonable best efforts to assist SB Northstar with arranging or syndicating the post-closing convertible notes and agreed to specified indemnification and gain-sharing arrangements in his personal capacity.
- The filing contains customary forward-looking statement disclaimers and warns that actual results and transaction outcomes may differ materially from management’s expectations.
Most Important Facts for Investors to Verify
- Whether the business combination received all required shareholder and regulatory approvals and ultimately closed.
- The final amount and terms of bridge and post-closing convertible notes, including conversion mechanics, interest, maturity, security and dilution.
- The amount of cash remaining in Aurora’s trust account after redemptions and whether the revised financing was fully funded.
- The final ownership and dilution profile following the stock consideration, PIPE amendments, note conversions and any shareholder redemptions.
- Better’s historical and current revenue, profitability, cash flow, liquidity, debt and operating performance, which are not presented in this 8-K.
- The definitive merger agreement amendments, financing agreements, proxy statement/prospectus and subsequent SEC filings for material conditions, contingencies and updated risk factors.