Conn’s, Inc. (NASDAQ:CONN) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
Securitization of Receivables
On April 19, 2017, affiliates of Conns, Inc. (the Company)
completed a securitization transaction (the Securitization
Transaction), which involved the issuance and sale in a private
offering of three classes of asset-backed fixed rate notes, Class
A, Class B and Class C, and one class, Class R, of asset-backed
pass-through notes (collectively, the Notes). The Notes are being
issued by Conns Receivables Funding 2017-A, LLC, a newly formed
special purpose entity that is indirectly owned by the Company
(the Issuer). The Notes are secured by a portfolio of
approximately $559 million of customer receivables sold and
contributed from the Companys loan portfolio indirectly to Conns
Receivables 2017-A Trust (the Receivables Trust), a newly formed
Delaware statutory trust. Net proceeds from the offering were
approximately $457 million and will be used to repay indebtedness
under the Companys asset-based credit facility and for other
general corporate purposes.
completed a securitization transaction (the Securitization
Transaction), which involved the issuance and sale in a private
offering of three classes of asset-backed fixed rate notes, Class
A, Class B and Class C, and one class, Class R, of asset-backed
pass-through notes (collectively, the Notes). The Notes are being
issued by Conns Receivables Funding 2017-A, LLC, a newly formed
special purpose entity that is indirectly owned by the Company
(the Issuer). The Notes are secured by a portfolio of
approximately $559 million of customer receivables sold and
contributed from the Companys loan portfolio indirectly to Conns
Receivables 2017-A Trust (the Receivables Trust), a newly formed
Delaware statutory trust. Net proceeds from the offering were
approximately $457 million and will be used to repay indebtedness
under the Companys asset-based credit facility and for other
general corporate purposes.
Fitch Ratings, Inc. and Kroll Bond Rating Agency, Inc. have rated
our Class A, Class B and Class C Notes as follows: Class A, BBB
by Fitch and Kroll; Class B as BB by Fitch and BB- by Kroll; and
Class C, B- by Fitch and Kroll. The Class R Notes are currently
being retained by an affiliate of the Company but some or all may
be sold in the future.
our Class A, Class B and Class C Notes as follows: Class A, BBB
by Fitch and Kroll; Class B as BB by Fitch and BB- by Kroll; and
Class C, B- by Fitch and Kroll. The Class R Notes are currently
being retained by an affiliate of the Company but some or all may
be sold in the future.
To execute the Securitization Transaction, Conn Credit I, L.P., a
wholly owned subsidiary of the Company (the Seller), sold or
conveyed certain customer receivable contracts (the Contracts)
(loans made to finance customer purchases of merchandise from the
Companys subsidiaries) to Conn Appliances Receivables Funding,
LLC, an indirect wholly owned subsidiary of the Company (the
Depositor), to a receivables purchase agreement, dated as of
April 19, 2017, by and between the Seller and the Depositor (the
First Purchase Agreement). The Depositor then contributed the
Contracts to the Receivables Trust to a receivables purchase
agreement, dated as of April 19, 2017, by and between the
Depositor and the Receivables Trust (the Second Purchase
Agreement). The Receivables Trust issued a certificate to the
Depositor representing a 50% interest in the Receivables Trust
(the Receivables Trust Certificate) and the Receivables Trust
Certificate was sold by the Depositor to the Issuer to a Purchase
and Sale Agreement, dated April 19, 2017, by and between
Depositor and Issuer (the Purchase and Sale Agreement). The
rights of the Issuer to and under the Receivables Trust
Certificate were pledged to Wells Fargo Bank, National
Association, as trustee (the Trustee), for the benefit of the
holders of the Notes and any other person to whom certain
obligations of the Issuer are payable. Conn Appliances, Inc., a
direct and wholly owned subsidiary of the Company (Conn
Appliances), is responsible for servicing the Receivables
transferred to the Receivables Trust as described in more detail
below.
wholly owned subsidiary of the Company (the Seller), sold or
conveyed certain customer receivable contracts (the Contracts)
(loans made to finance customer purchases of merchandise from the
Companys subsidiaries) to Conn Appliances Receivables Funding,
LLC, an indirect wholly owned subsidiary of the Company (the
Depositor), to a receivables purchase agreement, dated as of
April 19, 2017, by and between the Seller and the Depositor (the
First Purchase Agreement). The Depositor then contributed the
Contracts to the Receivables Trust to a receivables purchase
agreement, dated as of April 19, 2017, by and between the
Depositor and the Receivables Trust (the Second Purchase
Agreement). The Receivables Trust issued a certificate to the
Depositor representing a 50% interest in the Receivables Trust
(the Receivables Trust Certificate) and the Receivables Trust
Certificate was sold by the Depositor to the Issuer to a Purchase
and Sale Agreement, dated April 19, 2017, by and between
Depositor and Issuer (the Purchase and Sale Agreement). The
rights of the Issuer to and under the Receivables Trust
Certificate were pledged to Wells Fargo Bank, National
Association, as trustee (the Trustee), for the benefit of the
holders of the Notes and any other person to whom certain
obligations of the Issuer are payable. Conn Appliances, Inc., a
direct and wholly owned subsidiary of the Company (Conn
Appliances), is responsible for servicing the Receivables
transferred to the Receivables Trust as described in more detail
below.
The Notes were issued by the Issuer to a Base Indenture, dated
April 19, 2017, by and among the Issuer and the Trustee (the Base
Indenture), and a Series 2017-A Supplement to the Base Indenture,
dated as of April 19, 2017, by and among the Issuer and the
Trustee (the Supplemental Indenture, and together with the Base
Indenture, the Indenture). The Notes consist of the following
securities:
April 19, 2017, by and among the Issuer and the Trustee (the Base
Indenture), and a Series 2017-A Supplement to the Base Indenture,
dated as of April 19, 2017, by and among the Issuer and the
Trustee (the Supplemental Indenture, and together with the Base
Indenture, the Indenture). The Notes consist of the following
securities:
Class A Notes – $313,220,000 in aggregate principal amount of
Asset Backed Fixed Rate Notes, Class A, Series 2017-A that bear
interest at a fixed rate equal to 2.73% per annum and mature on
July 15, 2019.
Asset Backed Fixed Rate Notes, Class A, Series 2017-A that bear
interest at a fixed rate equal to 2.73% per annum and mature on
July 15, 2019.
Class B Notes – $106,270,000 in aggregate principal amount of
Asset Backed Fixed Rate Notes, Class B, Series 2017-A that bear
interest at a fixed rate equal to 5.11% per annum and mature on
February 15, 2020.
Asset Backed Fixed Rate Notes, Class B, Series 2017-A that bear
interest at a fixed rate equal to 5.11% per annum and mature on
February 15, 2020.
Class C Notes – $50,340,000 in aggregate principal amount of
Asset Backed Fixed Rate Notes, Class C, Series 2017-A that bear
interest at a fixed rate equal to 7.40% per annum and mature on
October 15, 2021.
Asset Backed Fixed Rate Notes, Class C, Series 2017-A that bear
interest at a fixed rate equal to 7.40% per annum and mature on
October 15, 2021.
The Notes (other than the Class R Notes) were offered and sold to
qualified institutional buyers through the initial purchaser to
the exemptions from registration provided by Rule 144A under the
Securities Act of 1933, as amended, or, solely with respect to
the Class A Notes, outside of the United States to Non-U.S.
Persons in compliance with Regulation S under the Securities Act.
qualified institutional buyers through the initial purchaser to
the exemptions from registration provided by Rule 144A under the
Securities Act of 1933, as amended, or, solely with respect to
the Class A Notes, outside of the United States to Non-U.S.
Persons in compliance with Regulation S under the Securities Act.
Payments on the Class R Notes are subordinate to all payments of
principal and interest on the Class A Notes, the Class B Notes
and the Class C Notes and all payments to Conn Appliances as
servicer, all third party service providers and the reserve
account. Credit enhancement will be provided by excess cashflow,
overcollateralization, a reserve account and in the case of the
Class A Notes, subordination of the Class B Notes and the Class C
Notes, and, in the case of the Class B Notes, subordination of
the Class C Notes.
principal and interest on the Class A Notes, the Class B Notes
and the Class C Notes and all payments to Conn Appliances as
servicer, all third party service providers and the reserve
account. Credit enhancement will be provided by excess cashflow,
overcollateralization, a reserve account and in the case of the
Class A Notes, subordination of the Class B Notes and the Class C
Notes, and, in the case of the Class B Notes, subordination of
the Class C Notes.
The Notes (other than the Class R Notes) are subject to
redemption by 50% of the holders of the Class R Notes, at their
option, in accordance with the terms specified in the Indenture,
on any interest payment date if, as of the last day of the
related monthly period, the balance of outstanding receivables
under the Contracts has declined to 10% or less of the balance of
outstanding receivables under the Contracts as of the February
28, 2017 (the Optional Redemption). Conn Appliances will have the
option to purchase (the Optional Purchase) the Contracts and
certain other assets of the Receivables Trust on any interest
payment date for an amount equal to the fair market value of such
assets from the Issuer on such interest payment date if, as of
the last day of the related monthly period, the balance of
outstanding receivables under the Contracts has declined to 10%
or less of the outstanding balance as of February 28, 2017. The
price paid for the Optional Purchase will not be less than an
amount sufficient
redemption by 50% of the holders of the Class R Notes, at their
option, in accordance with the terms specified in the Indenture,
on any interest payment date if, as of the last day of the
related monthly period, the balance of outstanding receivables
under the Contracts has declined to 10% or less of the balance of
outstanding receivables under the Contracts as of the February
28, 2017 (the Optional Redemption). Conn Appliances will have the
option to purchase (the Optional Purchase) the Contracts and
certain other assets of the Receivables Trust on any interest
payment date for an amount equal to the fair market value of such
assets from the Issuer on such interest payment date if, as of
the last day of the related monthly period, the balance of
outstanding receivables under the Contracts has declined to 10%
or less of the outstanding balance as of February 28, 2017. The
price paid for the Optional Purchase will not be less than an
amount sufficient
to pay accrued and unpaid interest then due on the Notes and the
aggregate unpaid principal, if any, of all of the outstanding
Notes plus other contractual fees and expenses related to
servicing the loan portfolio and to the Trustee.
aggregate unpaid principal, if any, of all of the outstanding
Notes plus other contractual fees and expenses related to
servicing the loan portfolio and to the Trustee.
After payment in full of all amounts due and owing with respect
to the Class A Notes, the Class B Notes and the Class C Notes are
subject to prepayment on any payment date then or thereafter, in
whole but not in part, at the option of 50% of the holders of the
Class R Notes (the Optional Prepayment). The amount necessary to
effect such Optional Prepayment will be, after giving effect to
all distributions on such payment date, (a) (i) for the Class B
Notes, equal to 100.5% of the outstanding principal amount, if
any, of the Class B Notes and (ii) for the Class C Notes, equal
to 101% of the outstanding principal amount if any, of the Class
C Notes, plus (b) accrued and unpaid interest on the Class B
Notes and Class C Notes through the day preceding the payment
date on which the redemption occurs, plus (c) any other amounts
payable to the Class B Noteholders and Class C Noteholders to the
Contracts, plus (d) any other amounts due and owing by the Issuer
to other parties to the Contracts; provided, that, the amount to
be paid to the holders of the Class B Notes and the holders of
the Class C Notes in connection with the exercise of the Optional
Prepayment will be equal to the sum of (a), (b) and (c) in the
foregoing.
to the Class A Notes, the Class B Notes and the Class C Notes are
subject to prepayment on any payment date then or thereafter, in
whole but not in part, at the option of 50% of the holders of the
Class R Notes (the Optional Prepayment). The amount necessary to
effect such Optional Prepayment will be, after giving effect to
all distributions on such payment date, (a) (i) for the Class B
Notes, equal to 100.5% of the outstanding principal amount, if
any, of the Class B Notes and (ii) for the Class C Notes, equal
to 101% of the outstanding principal amount if any, of the Class
C Notes, plus (b) accrued and unpaid interest on the Class B
Notes and Class C Notes through the day preceding the payment
date on which the redemption occurs, plus (c) any other amounts
payable to the Class B Noteholders and Class C Noteholders to the
Contracts, plus (d) any other amounts due and owing by the Issuer
to other parties to the Contracts; provided, that, the amount to
be paid to the holders of the Class B Notes and the holders of
the Class C Notes in connection with the exercise of the Optional
Prepayment will be equal to the sum of (a), (b) and (c) in the
foregoing.
If an event of default were to occur under the Indenture, the
Trustee may, and at the direction of the required noteholders
shall, accelerate the maturity of the Class A Notes, Class B
Notes and Class C Notes, in which event the cash proceeds of the
Receivables that otherwise might be released to the Class R
Noteholders would instead be directed entirely toward repayment
of the Notes. Events of default include, but are not limited to,
events such as failure to make required payments on the Notes or
specified bankruptcy-related events.
Trustee may, and at the direction of the required noteholders
shall, accelerate the maturity of the Class A Notes, Class B
Notes and Class C Notes, in which event the cash proceeds of the
Receivables that otherwise might be released to the Class R
Noteholders would instead be directed entirely toward repayment
of the Notes. Events of default include, but are not limited to,
events such as failure to make required payments on the Notes or
specified bankruptcy-related events.
The purchase of the Class A Notes, the Class B Notes, and Class C
Notes was governed by a Note Purchase Agreement entered into on
April 12, 2017 (the Note Purchase Agreement), by the Company, the
Issuer, the Depositor, Conn Appliances and Deutsche Bank
Securities Inc., Credit Suisse Securities (USA) LLC, MUFG
Securities Americas Inc. and JP Morgan Securities LLC, as initial
purchasers.
Notes was governed by a Note Purchase Agreement entered into on
April 12, 2017 (the Note Purchase Agreement), by the Company, the
Issuer, the Depositor, Conn Appliances and Deutsche Bank
Securities Inc., Credit Suisse Securities (USA) LLC, MUFG
Securities Americas Inc. and JP Morgan Securities LLC, as initial
purchasers.
Conn Appliances is responsible for servicing the Receivables
transferred to the Receivables Trust to a Servicing Agreement,
dated as of April 19, 2017 (the Servicing Agreement) by and among
the Issuer, the Receivables Trust, Conn Appliances and the
Trustee. Under the Servicing Agreement, Conn Appliances will
receive a monthly service fee equal to 4.75% (annualized) based
on the outstanding balance of the Trust Estate. If Conn
Appliances defaults in its obligations under the Servicing
Agreement, it may, and under certain circumstances will, be
terminated and replaced as Servicer.
transferred to the Receivables Trust to a Servicing Agreement,
dated as of April 19, 2017 (the Servicing Agreement) by and among
the Issuer, the Receivables Trust, Conn Appliances and the
Trustee. Under the Servicing Agreement, Conn Appliances will
receive a monthly service fee equal to 4.75% (annualized) based
on the outstanding balance of the Trust Estate. If Conn
Appliances defaults in its obligations under the Servicing
Agreement, it may, and under certain circumstances will, be
terminated and replaced as Servicer.
The foregoing descriptions of the Note Purchase Agreement, the
Base Indenture, the Supplemental Indenture, the First Purchase
Agreement, the Second Purchase Agreement, the Purchase and Sale
Agreement, and Servicing Agreement do not purport to be complete
and are qualified in their entirety by reference to such
documents, which are filed as Exhibits 1.1, 4.1, 4.2, 10.1, 10.2,
10.3 and 10.4, respectively, to this Current Report on Form 8-K
and incorporated by reference herein.
Base Indenture, the Supplemental Indenture, the First Purchase
Agreement, the Second Purchase Agreement, the Purchase and Sale
Agreement, and Servicing Agreement do not purport to be complete
and are qualified in their entirety by reference to such
documents, which are filed as Exhibits 1.1, 4.1, 4.2, 10.1, 10.2,
10.3 and 10.4, respectively, to this Current Report on Form 8-K
and incorporated by reference herein.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
The information set forth under Item 1.01 above is incorporated
herein by reference.
herein by reference.
Item 7.01 Regulation FD Disclosure.
On April 20, 2017, the Company issued a press release announcing
the closing of the Securitization Transaction. A copy of the
press release is furnished herewith as Exhibit 99.1.
the closing of the Securitization Transaction. A copy of the
press release is furnished herewith as Exhibit 99.1.
None of the information contained in Item 7.01 or Exhibits 99.1
of this Form 8-K shall be deemed to be filed for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended,
and none of it shall be incorporated by reference in any filing
under the Securities Act of 1933, as amended. Furthermore, this
report will not be deemed an admission as to the materiality of
any information in the report that is required to be disclosed
solely by Regulation FD.
of this Form 8-K shall be deemed to be filed for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended,
and none of it shall be incorporated by reference in any filing
under the Securities Act of 1933, as amended. Furthermore, this
report will not be deemed an admission as to the materiality of
any information in the report that is required to be disclosed
solely by Regulation FD.
Item 9.01. Financial Statements and Exhibits.
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Exhibit No.
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Description
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1.1*
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Note Purchase Agreement, dated April 12, 2017, by and
among Conns, Inc., Conns Receivables Funding 2017-A, LLC, Conn Appliances, Inc., Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC, MUFG Securities Americas Inc. and JP Morgan Securities LLC, as initial purchasers. |
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4.1*
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Base Indenture, dated as of April 19, 2017 by and
between Conns Receivables Funding 2017-A, LLC, and Wells Fargo Bank, National Association |
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4.2*
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Series 2017-A Supplement to the Base Indenture, dated
as of April 19, 2017, by and between Conns Receivables Funding 2017-A, LLC and Wells Fargo Bank, National Association |
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10.1*
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First Receivables Purchase Agreement, dated April 19,
2017, by and between Conn Credit I, L.P. and Conn Appliances Receivables Funding, LLC |
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10.2*
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Second Receivables Purchase Agreement, dated April 19,
2017, by and between Conn Appliances Receivables Funding, LLC and Conns Receivables 2017-A Trust |
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10.3*
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Purchase and Sale Agreement, dated April 19, 2017 by
and between Conn Appliances Receivables Funding, LLC and Conns Receivables 2017-A Trust |
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10.4*
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Servicing Agreement dated as of April 19, 2017, among
Conns Receivables Funding 2017-A, LLC, Conns Receivables 2017-A Trust, Conn Appliances, Inc. and Wells Fargo Bank, National Association |
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99.1*
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Press Release dated April 20, 2017
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* Filed herewith
About Conn’s, Inc. (NASDAQ:CONN)
Conn’s, Inc. is a specialty retailer that offers a selection of consumer goods and related services in addition to a credit solution for its core credit constrained consumers. The Company operates through two segments: retail and credit. The Retail segment includes product categories, such as furniture and mattress, including furniture and related accessories for the living room, dining room and bedroom; home appliance, including refrigerators, freezers, washers, dryers, dishwashers and ranges; Consumer electronics, including liquid-crystal-display (LED), organic LED (OLED), Ultra high definition (HD) and Internet-ready televisions, and home office, including computers, printers and accessories. Its credit segment provides short- and medium-term financing for its retail customers. Its credit offering provides financing solutions to credit constrained consumers having limited banking options. The Company operates its business through its retail stores and Website. Conn’s, Inc. (NASDAQ:CONN) Recent Trading Information
Conn’s, Inc. (NASDAQ:CONN) closed its last trading session up +0.30 at 13.55 with 699,411 shares trading hands.
