Rimini Street, Inc. - Form 8-K Summary
Business Context and Reporting Period
Date: June 18, 2018
Company: Rimini Street, Inc.
Event: Entry into a Material Definitive Agreement (Securities Purchase Agreement) for a private placement of securities.
The Company entered into an agreement to raise capital through a private placement of 13.00% Series A Redeemable Convertible Preferred Stock, Common Stock, and convertible secured promissory notes. The transaction is subject to stockholder approval and other closing conditions, with an expected closing in the third fiscal quarter of 2018.
Key Financial Metrics and Transaction Terms
- Aggregate Purchase Price: $140,000,000 in cash (subject to a $7,000,000 discount to the face value of the Preferred Stock).
- Securities Issued:
- 140,000 shares of Series A Preferred Stock.
- 2,896,556 shares of Common Stock.
- Promissory Notes with no principal amount outstanding at issuance (collateralize potential redemption obligations).
- Preferred Stock Dividends: 13.0% per annum (10.0% cash, 3.0% payment-in-kind) for the first five years; 13.0% cash thereafter.
- Conversion Rate: Initial conversion price of $10.00 per share of Common Stock.
- Use of Proceeds: Repayment of all outstanding indebtedness under the existing Credit Facility, payment of related fees, and transaction expenses.
- Expected Charges: Management anticipates extinguishment charges up to approximately $8 million (make-whole premium) and write-offs of debt discount/issuance costs up to approximately $50 million upon closing.
Material Changes and Conditions
The filing details a significant restructuring of the Company's capital structure. Key material changes include:
- Debt Refinancing: Proceeds will be used to retire the existing term loan financing agreement (Credit Facility).
- Stockholder Approval: The issuance exceeds 20% of outstanding Common Stock at a price below book/market value, requiring a special meeting and stockholder vote under Nasdaq Rules.
- Loan Amendment: The Company amended its GPIC Loan to extend the maturity date to January 4, 2019, effective upon the closing of the private placement.
- Restrictions: Until 95% of the new securities are retired, the Company is restricted from incurring new indebtedness, subject to exceptions.
Outlook, Risks, and Contingencies
Outlook and Management Commentary: The Company intends to close the transaction in Q3 2018. Management is reviewing accounting matters related to the issuance. The transaction is designed to provide liquidity and eliminate existing debt covenants.
Risks and Contingencies:
- Closing Conditions: Completion is contingent on stockholder approval, no material adverse effect, no delisting notice, and no settlement of legal proceedings exceeding $10.0 million.
- Termination: The agreement may be terminated by either party if not completed by October 15, 2018.
- Failure to Close: If the placement fails, the Company may face liquidity constraints, inability to fund growth, and continued costs associated with the transaction.
- Redemption Triggers: The Preferred Stock becomes mandatorily redeemable after five years or upon a Material Adverse Effect or Material Litigation Effect, potentially triggering payment obligations under the Promissory Notes.
Investor Verification Checklist
- Verify the outcome of the special stockholder meeting required for Nasdaq compliance.
- Confirm the actual closing date and whether the $140 million proceeds were received.
- Monitor the Q3 2018 financial statements for the anticipated $58 million in total charges ($8 million make-whole + $50 million write-offs).
- Review the impact of the new 13% dividend obligation on future cash flows.
- Check for any material litigation or settlements exceeding $10 million that could block the closing.