CV Holdings has entered into a Securities Purchase Agreement and an Investor Rights Agreement with an affiliate of Tricadia Capital Management in connection with the sale in a private placement of shares of newly created Non-Convertible Senior Preferred Stock shares of Common Stock of the Company.
The Tricadia investment is expected to replace the existing funding source for the Company's co-investment requirements on its NPL business. The Company is currently evaluating several other investment opportunities and, subject to Tricadia's approval, may decide to pursue one or more of them.
The Investor may purchase up to USD50.0 million of Preferred through multiple issuances, subject to certain agreed-upon conditions. On 29 June, 2015, the Investor purchased USD20.0 million of Preferred and received 4,350,000 shares of Common plus the right to receive an additional 8,271,596 shares at its option, together comprising 20 per cent of the fully diluted common equity of the Company as of such date. The Investor may require that the Company redeem any Preferred on and after the five-year anniversary of its respective issuance. The Company has the option to pay or accrue a 10 per cent dividend on Preferred from closing through the three-year anniversary of each issuance, and then may either continue to pay Preferred dividends in cash at the rate of 10 per cent per annum or accrue such dividends at the rate of 12 per cent per annum until the Preferred is redeemed or otherwise defeased. The Company may redeem any Preferred, subject to certain approvals by the Investor, on and after the three-year anniversary of its issuance. If the Company fails to make payment of dividends or redeem the Preferred timely, the Investor may become entitled to appoint a majority of the members of the Company's board of directors.
At each subsequent funding by the Investor, the Company will issue additional shares of Common comprising 1 per cent of the fully diluted common equity of the Company (calculated as of the date of such funding, as adjusted for any previous issuances that have diluted the Investor's ownership) for every USD1.0 million of Preferred purchased. If the full USD50.0 million of Preferred were to be issued to the Investor, the Investor would consequently also own 50 per cent of the Company on a fully diluted basis. In addition, the Investor has pre-emptive and other rights allowing the Investor to purchase any new issuances of securities by the Company.
The Investor has material corporate governance rights, including, among other things, the equivalent of two board seats and approval rights over major corporate decisions. No assurances can be given that the Investor will purchase additional Preferred or as to the timing or nature of the investment of the proceeds to the Company from any such issuance.
Although Preferred has a liquidation preference that is senior to Common, Preferred is not convertible into Common and therefore does not dilute the existing voting power or ownership of the holders of Common. Notwithstanding the foregoing, the Common issued and to be issued in conjunction with Preferred increases the amount of issued and outstanding Common, as described below. At closing, the Company's outstanding fully diluted common shares increased from the currently fully diluted 50,486,385 to 63,107,981 and the Investor owns, or has the right to own, approximately 20 per cent of the latter. On a pro forma basis, assuming that the Investor funds the full USD50.0 million investment, the Company's outstanding fully diluted shares would increase from the currently fully diluted 50,486,385 to 100,972,770, of which the Investor would own approximately 50 per cent. The latter number is subject to further change to reflect any additional issuances that increase the number of shares necessary to provide the Investor with 1 per cent of the fully diluted capital stock of the Company for each USD1.0 million funded by the Investor.
