EMERGENT CAPITAL, INC. (NYSE:EMG) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01
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Entry into a Material Definitive Agreement.
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The Master Transaction Agreement
On March 15, 2017, Emergent Capital, Inc. (the Company) entered
into a series of separate Master Transaction Agreements (together,
the Agreements) by and between the Company, PJC Investments, LLC, a
Texas limited liability company (PJC), and each such Consenting
Convertible Note Holder that is a party to such Agreement
(Consenting Holders) regarding a series of integrated transactions
with the intent to effect a recapitalization of the Company (the
Transaction), which includes an Amendment to the Companys Articles
of Incorporation to increase the number of authorized shares of the
Company’s common stock, $0.01 par value (the Common Stock), a
Common Stock Purchase Agreement, a Convertible Note Exchange Offer,
a New Convertible Note Indenture providing for the issuance of New
Convertible Notes, a Senior Note Exchange Offer, a New Senior Note
Indenture providing for the issuance of New Senior Notes, a Senior
Note Purchase Agreement, a Warrant and certain other agreements and
documents to be delivered in connection with the Transaction (each
as defined in the Agreements, and together with the Agreements, the
Transaction Documents). The Agreements and the transactions
contemplated under the Agreements were unanimously approved by the
Board of Directors of the Company on March 13, 2017.
into a series of separate Master Transaction Agreements (together,
the Agreements) by and between the Company, PJC Investments, LLC, a
Texas limited liability company (PJC), and each such Consenting
Convertible Note Holder that is a party to such Agreement
(Consenting Holders) regarding a series of integrated transactions
with the intent to effect a recapitalization of the Company (the
Transaction), which includes an Amendment to the Companys Articles
of Incorporation to increase the number of authorized shares of the
Company’s common stock, $0.01 par value (the Common Stock), a
Common Stock Purchase Agreement, a Convertible Note Exchange Offer,
a New Convertible Note Indenture providing for the issuance of New
Convertible Notes, a Senior Note Exchange Offer, a New Senior Note
Indenture providing for the issuance of New Senior Notes, a Senior
Note Purchase Agreement, a Warrant and certain other agreements and
documents to be delivered in connection with the Transaction (each
as defined in the Agreements, and together with the Agreements, the
Transaction Documents). The Agreements and the transactions
contemplated under the Agreements were unanimously approved by the
Board of Directors of the Company on March 13, 2017.
Under the Agreements, PJC and other parties agreed to certain
undertakings, including: (i) PJC or its designee (the “Investor”)
purchasing up to 50% of the Companys New Senior Notes from the
Holders (as defined below) to the Senior Note Purchase Agreement,
(ii) PJC or the Investor purchasing $15.0 million in shares of
Common Stock, to the Common Stock Purchase Agreement, and (iii)
issuance to PJC or the Investor of a warrant to purchase up to
34,000,000 shares of Common Stock at an exercise price of $0.25 per
share for an aggregate purchase price of up to $8.5 million. Upon
the closing of the proposed transactions, the Company’s Board of
Directors will include four members representing PJC and one member
representing the convertible note holders. The Transaction is
subject to certain conditions described in this Current Report on
Form 8-K, including that the Company shall have obtained the
requisite approval by the Company’s shareholders to the Articles
Amendment and that the requisite number of holders of the
Company’s senior secured notes and unsecured convertible notes
shall have tendered their notes in connection with the applicable
exchange offer as described below, and certain customary closing
conditions, including that each of the Transaction Documents shall
have been executed and delivered to the other parties thereto. The
Transaction is expected to close in the second quarter of 2017,
although the consummation of the Transaction is subject to multiple
conditions and there can be no assurance that the Transaction will
close on a timely basis or at all.
undertakings, including: (i) PJC or its designee (the “Investor”)
purchasing up to 50% of the Companys New Senior Notes from the
Holders (as defined below) to the Senior Note Purchase Agreement,
(ii) PJC or the Investor purchasing $15.0 million in shares of
Common Stock, to the Common Stock Purchase Agreement, and (iii)
issuance to PJC or the Investor of a warrant to purchase up to
34,000,000 shares of Common Stock at an exercise price of $0.25 per
share for an aggregate purchase price of up to $8.5 million. Upon
the closing of the proposed transactions, the Company’s Board of
Directors will include four members representing PJC and one member
representing the convertible note holders. The Transaction is
subject to certain conditions described in this Current Report on
Form 8-K, including that the Company shall have obtained the
requisite approval by the Company’s shareholders to the Articles
Amendment and that the requisite number of holders of the
Company’s senior secured notes and unsecured convertible notes
shall have tendered their notes in connection with the applicable
exchange offer as described below, and certain customary closing
conditions, including that each of the Transaction Documents shall
have been executed and delivered to the other parties thereto. The
Transaction is expected to close in the second quarter of 2017,
although the consummation of the Transaction is subject to multiple
conditions and there can be no assurance that the Transaction will
close on a timely basis or at all.
The Agreements contain standard representations and warranties
related to each party, and may be terminated prior to the Closing
under certain circumstances, including, without limitation, by:
related to each party, and may be terminated prior to the Closing
under certain circumstances, including, without limitation, by:
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i.
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mutual written consent of PJC and the Company;
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ii.
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PJC or the Company, if the Closing shall not have occurred by
August 31, 2017; |
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iii.
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the Convertible Note Holders that, in the aggregate, hold a
majority of the aggregate principal amount of the outstanding Convertible Notes, if the Closing shall not have occurred by September 30, 2017; |
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iv.
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PJC or the Company, as a non-breaching party, if there has
been a material breach of certain representations, warranties or covenants made by PJC or the Company, as a breaching party, which shall not have been cured or cannot be cured within 30 days of receipt of written notice of such breach; |
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v.
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the Convertible Note Holders that, in the aggregate, hold a
majority of the aggregate principal amount of the outstanding Convertible Notes, if the Company or PJC shall materially breach any representation, warranty, covenant, obligation or agreement and such breach shall not have been cured or cannot be cured within 30 days of receipt of written notice of such breach and such breach shall result in an adverse economic impact to the Consenting Convertible Note Holders; |
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vi.
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PJC if the conditions precedent to the consummation of either
Exchange Offer are not satisfied at the time such Exchange Offer expires or as of the date the other Transaction Documents are satisfied; or |
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vii.
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PJC or the Company, if the transaction is enjoined or
prohibited by governmental authorities. |
Common Stock Purchase Agreement
At or contemporaneously with the closing of the Transaction, the
Company will enter into a Common Stock Purchase Agreement (the
Purchase Agreement) with the purchasers’ party to the Purchase
Agreement (the Purchasers). The Purchase Agreement will generally
provide for the Purchasers to purchase up to 92,000,000 shares of
Common Stock at a price of $0.25 per share for an aggregate price
of up to $23.0 million, of which PJC or the Investor will purchase
60,000,000 shares of Common Stock for an aggregate price of $15.0
million. The remaining Purchasers may purchase up to 32,000,000
shares of Common Stock for an aggregate price of up to $8.0
million. The Purchase Agreement shall contain customary
representations, warranties, and covenants.
Company will enter into a Common Stock Purchase Agreement (the
Purchase Agreement) with the purchasers’ party to the Purchase
Agreement (the Purchasers). The Purchase Agreement will generally
provide for the Purchasers to purchase up to 92,000,000 shares of
Common Stock at a price of $0.25 per share for an aggregate price
of up to $23.0 million, of which PJC or the Investor will purchase
60,000,000 shares of Common Stock for an aggregate price of $15.0
million. The remaining Purchasers may purchase up to 32,000,000
shares of Common Stock for an aggregate price of up to $8.0
million. The Purchase Agreement shall contain customary
representations, warranties, and covenants.
Common Stock Purchase Warrant
At or contemporaneously with the closing of the Transaction, the
Company will cause to be issued a warrant (the Warrant) to the
Investor to purchase up to an aggregate of 34,000,000 shares of the
Common Stock at an exercise price of $0.25 per share (the Warrant
Shares) for an aggregate price of up to $8.5 million.
Company will cause to be issued a warrant (the Warrant) to the
Investor to purchase up to an aggregate of 34,000,000 shares of the
Common Stock at an exercise price of $0.25 per share (the Warrant
Shares) for an aggregate price of up to $8.5 million.
The Warrant shall vest and become exercisable as follows: (i) with
respect to 14,000,000 Warrant Shares, immediately upon the issuance
of the Warrant, and (ii) with respect to the remaining 20,000,000
Warrant Shares, at later times tied to the conversion of Existing
Convertible Notes and New Convertible Notes outstanding upon the
closing of the Transaction into shares of Common Stock. The Warrant
has an eight year term. The number of Warrant Shares is subject to
anti-dilution adjustment provisions.
respect to 14,000,000 Warrant Shares, immediately upon the issuance
of the Warrant, and (ii) with respect to the remaining 20,000,000
Warrant Shares, at later times tied to the conversion of Existing
Convertible Notes and New Convertible Notes outstanding upon the
closing of the Transaction into shares of Common Stock. The Warrant
has an eight year term. The number of Warrant Shares is subject to
anti-dilution adjustment provisions.
Exchange Offers
As part of the Transaction, the Company will offer to exchange, in
each case with existing holders, its outstanding 8.5% Senior
Unsecured Convertible Notes due 2019 (the Existing Convertible
Notes) for New Convertible Notes, described below, and its
outstanding 15.0% Senior Notes due 2018 (the Existing Senior Notes)
for New Senior Notes, described below. At least 98% of the holders
of each class of notes must tender in the relevant exchange offer
as a condition to closing the Transaction.
each case with existing holders, its outstanding 8.5% Senior
Unsecured Convertible Notes due 2019 (the Existing Convertible
Notes) for New Convertible Notes, described below, and its
outstanding 15.0% Senior Notes due 2018 (the Existing Senior Notes)
for New Senior Notes, described below. At least 98% of the holders
of each class of notes must tender in the relevant exchange offer
as a condition to closing the Transaction.
New Convertible Note Indenture and New Convertible Notes
At or contemporaneously with the closing of the Transaction, the
Company will cause to be issued the 5.0% Senior Unsecured
Convertible Notes due 2023 (the New Convertible Notes) in an
aggregate amount not to exceed approximately $75.0 million, to a
Convertible Note Indenture (the New Convertible Note Indenture)
between the Company and the trustee to be later identified.
Company will cause to be issued the 5.0% Senior Unsecured
Convertible Notes due 2023 (the New Convertible Notes) in an
aggregate amount not to exceed approximately $75.0 million, to a
Convertible Note Indenture (the New Convertible Note Indenture)
between the Company and the trustee to be later identified.
The New Convertible Notes will be unsecured senior obligations of
the Company and will mature six years from the Closing. The New
Convertible Notes will bear interest at a rate of 5.00% per annum
from the issue date, payable semi-annually.
the Company and will mature six years from the Closing. The New
Convertible Notes will bear interest at a rate of 5.00% per annum
from the issue date, payable semi-annually.
The Company may redeem, in whole but not in part, the New
Convertible Notes at a redemption price of 50% of the principal
amount of the New Convertible Notes to be redeemed, plus accrued
and unpaid interest and additional interest, if any, if the last
reported sale price of the Common Stock equals or exceeds 120% of
the conversion price for at least 15 trading days in any period of
30 consecutive trading days. The Company may, at its election, pay
or deliver as the case may be, to all Holders of the New
Convertible Notes, either (a) solely cash, (b) solely shares of
Common Stock, or (c) a combination of cash and shares of Common
Stock.
Convertible Notes at a redemption price of 50% of the principal
amount of the New Convertible Notes to be redeemed, plus accrued
and unpaid interest and additional interest, if any, if the last
reported sale price of the Common Stock equals or exceeds 120% of
the conversion price for at least 15 trading days in any period of
30 consecutive trading days. The Company may, at its election, pay
or deliver as the case may be, to all Holders of the New
Convertible Notes, either (a) solely cash, (b) solely shares of
Common Stock, or (c) a combination of cash and shares of Common
Stock.
The New Convertible Note Indenture provides for customary events of
default, which include (subject in certain cases to customary grace
and cure periods), among others: nonpayment of principal or
interest; breach of covenants or other agreements in the New
Convertible Note Indenture; defaults in failure to pay certain
other indebtedness; and certain events of bankruptcy or insolvency.
Generally, if an event of default occurs and is continuing under
the New Convertible Note Indenture, the trustee or the holders of
at least 25% in aggregate principal amount of the New Convertible
Notes then outstanding may declare all unpaid principal plus
accrued interest on the New Convertible Notes immediately due and
payable, subject to certain conditions set forth in the New
Convertible Note Indenture. In addition, holders of the New
Convertible Notes may require the Company to repurchase the New
Convertible Notes upon the occurrence of certain designated events
at a repurchase price of 50% of the principal amount of the New
Convertible Notes, plus accrued and unpaid interest.
default, which include (subject in certain cases to customary grace
and cure periods), among others: nonpayment of principal or
interest; breach of covenants or other agreements in the New
Convertible Note Indenture; defaults in failure to pay certain
other indebtedness; and certain events of bankruptcy or insolvency.
Generally, if an event of default occurs and is continuing under
the New Convertible Note Indenture, the trustee or the holders of
at least 25% in aggregate principal amount of the New Convertible
Notes then outstanding may declare all unpaid principal plus
accrued interest on the New Convertible Notes immediately due and
payable, subject to certain conditions set forth in the New
Convertible Note Indenture. In addition, holders of the New
Convertible Notes may require the Company to repurchase the New
Convertible Notes upon the occurrence of certain designated events
at a repurchase price of 50% of the principal amount of the New
Convertible Notes, plus accrued and unpaid interest.
New Senior Note Indenture and New Senior Notes
At or contemporaneously with the closing of the Transaction, the
Company will cause to be issued the 8.5% Senior Notes due 2021 (the
New Senior Notes) in an aggregate amount not to exceed
approximately $40.0 million to a Senior Note Indenture (the New
Senior Note Indenture) between the Company, as issuer, and the
trustee to be later identified. Up to approximately $30.0 million
aggregate principal amount of New Senior Notes may be issued to
holders of the Existing Senior Notes in the relevant exchange
offer, and PJC or the Investor may acquire up to an additional
$10.0 million principal amount of New Senior Notes.
Company will cause to be issued the 8.5% Senior Notes due 2021 (the
New Senior Notes) in an aggregate amount not to exceed
approximately $40.0 million to a Senior Note Indenture (the New
Senior Note Indenture) between the Company, as issuer, and the
trustee to be later identified. Up to approximately $30.0 million
aggregate principal amount of New Senior Notes may be issued to
holders of the Existing Senior Notes in the relevant exchange
offer, and PJC or the Investor may acquire up to an additional
$10.0 million principal amount of New Senior Notes.
The New Senior Notes will be secured senior obligations of the
Company and will mature four years from the date of Closing. The
New Senior Notes will bear interest at a rate of 8.5% per annum,
payable quarterly.
Company and will mature four years from the date of Closing. The
New Senior Notes will bear interest at a rate of 8.5% per annum,
payable quarterly.
The New Senior Notes may be optionally redeemed in full by the
Company at any time and must be redeemed in full upon additional
issuances of debt by the Company in each case, at a price equal to
50% of the principal amount redeemed plus (i) accrued and unpaid
interest on the New Senior Notes redeemed up to the date of
redemption, and (ii) the Applicable Premium, if any, as defined in
the New Senior Note Indenture. Upon a change of control, the
Company will be required to make an offer to holders of the New
Senior Notes to repurchase the New Senior Notes at a price equal to
107.5% of their principal amount, plus accrued and unpaid interest
up to the date of redemption.
Company at any time and must be redeemed in full upon additional
issuances of debt by the Company in each case, at a price equal to
50% of the principal amount redeemed plus (i) accrued and unpaid
interest on the New Senior Notes redeemed up to the date of
redemption, and (ii) the Applicable Premium, if any, as defined in
the New Senior Note Indenture. Upon a change of control, the
Company will be required to make an offer to holders of the New
Senior Notes to repurchase the New Senior Notes at a price equal to
107.5% of their principal amount, plus accrued and unpaid interest
up to the date of redemption.
The New Senior Notes contain negative covenants restricting
additional debt incurred by the Company, creation of liens on the
collateral securing the New Senior Notes, and restrictions on
dividends and stock repurchases, among other things. The New Senior
Notes are secured by settlement proceeds, if any, received from
certain litigation involving the Company, certain notes issued to
the Company, and pledges of 65% of the equity interests in Blue
Heron Designated Activity Company, OLIPP IV, LLC and Red Reef
Alternative Investments, LLC.
additional debt incurred by the Company, creation of liens on the
collateral securing the New Senior Notes, and restrictions on
dividends and stock repurchases, among other things. The New Senior
Notes are secured by settlement proceeds, if any, received from
certain litigation involving the Company, certain notes issued to
the Company, and pledges of 65% of the equity interests in Blue
Heron Designated Activity Company, OLIPP IV, LLC and Red Reef
Alternative Investments, LLC.
The New Senior Note Indenture provides for customary events of
default which include (subject in certain cases to customary grace
and cure periods), among others: nonpayment of principal or
interest; breach of covenants or other agreements in the New Senior
Note Indenture; defaults in failure to pay certain other
indebtedness; and certain events of bankruptcy or insolvency.
Generally, if an event of default occurs and is continuing under
the New Senior Note Indenture, the trustee or the holders of at
least 25% in aggregate principal amount of the New Senior Notes
then outstanding may declare the principal of and accrued but
unpaid interest, plus a premium, if any, on all the New Senior
Notes immediately due and payable, subject to certain conditions
set forth in the New Senior Note Indenture.
default which include (subject in certain cases to customary grace
and cure periods), among others: nonpayment of principal or
interest; breach of covenants or other agreements in the New Senior
Note Indenture; defaults in failure to pay certain other
indebtedness; and certain events of bankruptcy or insolvency.
Generally, if an event of default occurs and is continuing under
the New Senior Note Indenture, the trustee or the holders of at
least 25% in aggregate principal amount of the New Senior Notes
then outstanding may declare the principal of and accrued but
unpaid interest, plus a premium, if any, on all the New Senior
Notes immediately due and payable, subject to certain conditions
set forth in the New Senior Note Indenture.
Note Purchase Agreement
At or contemporaneously with the closing of the Transaction, PJC or
the Investor and certain holders of New Senior Notes (the Holders)
will enter into a Note Purchase Agreement (the Note Purchase
Agreement). The Note Purchase Agreement will generally provide for
PJC or the Investor to purchase up to 50% of the New Senior Notes
held by the Holders for an aggregate purchase price equal to the
face amount of such purchased New Senior Notes.
the Investor and certain holders of New Senior Notes (the Holders)
will enter into a Note Purchase Agreement (the Note Purchase
Agreement). The Note Purchase Agreement will generally provide for
PJC or the Investor to purchase up to 50% of the New Senior Notes
held by the Holders for an aggregate purchase price equal to the
face amount of such purchased New Senior Notes.
Terms not defined in this Current Report on Form 8-K shall have the
meaning as set forth in the Agreements and respective Transaction
Documents. The foregoing description of the Agreements and the
transactions contemplated thereby is a summary only and is
qualified in its entirety by reference to the full text of the
Agreements, which will be filed as exhibits to the Companys
Quarterly Report on Form 10-Q for the period ending March 31, 2017.
meaning as set forth in the Agreements and respective Transaction
Documents. The foregoing description of the Agreements and the
transactions contemplated thereby is a summary only and is
qualified in its entirety by reference to the full text of the
Agreements, which will be filed as exhibits to the Companys
Quarterly Report on Form 10-Q for the period ending March 31, 2017.
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Item 8.01
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Other Events.
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On March 16, 2017, the Company issued a press release announcing
the execution of the Agreements. A copy of the press release is
filed as Exhibit 99.1 to this Current Report on Form 8-K.
the execution of the Agreements. A copy of the press release is
filed as Exhibit 99.1 to this Current Report on Form 8-K.
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Item 9.01
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Financial Statements and Exhibits.
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(d) Exhibit
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99.1
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Press release issued on March 16, 2017.
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About EMERGENT CAPITAL, INC. (NYSE:EMG)
Emergent Capital, Inc., formerly Imperial Holdings, Inc., is a specialty finance company that invests in asset classes, primarily life settlements. The Company, through its subsidiary companies, owns a portfolio of approximately 630 life insurance policies (life settlements). The Company purchases individual policies and portfolios of life insurance policies and manages those assets based on actuarial and market data. The Company provides customized liquidity solutions to owners of illiquid financial assets in two markets, which include life finance and structured settlements. The Company focuses on lending to outright purchases of portfolios, to tertiary trades, as well as individual secondary market purchases. The Company invests in short and long-term life settlement investments. EMERGENT CAPITAL, INC. (NYSE:EMG) Recent Trading Information
EMERGENT CAPITAL, INC. (NYSE:EMG) closed its last trading session up +0.015 at 0.295 with 3,492,420 shares trading hands.
