NEW YORK, March 7, 2018 /PRNewswire/ -- BGC Partners,
Inc. (NASDAQ: BGCP) ("BGC Partners" or "BGC"), a leading global
brokerage company servicing the financial and real estate markets,
and its publicly traded subsidiary, Newmark Group, Inc. (NASDAQ:
NMRK) ("Newmark"), today announced a substantial new investment by
BGC in Newmark, which is expected to greatly enhance both
companies' credit metrics.
Additional BGC Investment in Newmark and Repayment of Term
Loan
On March 7, 2018, BGC
purchased approximately 16.6 million newly issued exchangeable
limited partnership units ("Units") of Newmark2 for
$242.0 million. The price per Unit
was based on the $14.57 closing price
of Newmark's Class A common shares on March
6, 2018. These newly-issued Units are exchangeable, at BGC's
discretion, into either Class A common shares or Class B common
shares of Newmark. The Units sold to BGC were not subject to the
180-day "lock-up" restriction contained in the underwriting
agreement for Newmark's initial public offering
("IPO").3 Newmark will use the proceeds from these newly
issued Units to repay in full the remaining $242.0 million balance of its $575 million unsecured senior term loan before
the end of the first quarter of 2018.4
Management Comment
"As we have stated many times, both
BGC and Newmark intend to remain investment grade," said
Howard W. Lutnick, Chairman and
Chief Executive Officer of BGC and Chairman of Newmark. "By taking
these actions, we have greatly strengthened both companies' balance
sheets and improved their leverage ratios. BGC and Newmark will be
better positioned to pursue their long-term strategies of growing
their revenues, earnings, and cash flow by profitably hiring and
making accretive acquisitions".
Improved Leverage Ratios
As a result of the debt
repayment, both BGC's consolidated and Newmark's stand-alone
long-term debt are expected to be reduced by $270.7 million, all else equal, when compared to
year-end 2017.5 Both companies therefore expect
annualized interest expenses to decrease by more than $11.4 million, and also expect to have ratios of
long-term debt to Adjusted EBITDA of below 2.5 times as of the end
of the first quarter of 2018, all else equal.6
Update to Outlooks
BGC is trending towards the high
end of its previously stated consolidated outlook for revenues and
Adjusted Earnings for the first quarter of 2018. This outlook was
contained in BGC's financial results press release issued on
February 9, 2018, which can be found
at http://ir.bgcpartners.com. BGC's improved quarterly outlook is
expected to more than offset the increase in BGC's share count with
respect to Adjusted Earnings per share.
Newmark today reaffirmed the entirety of its outlook for the
full year 2018 as contained in Newmark's financial results press
release issued on the same date. This press release can be found at
http://ir.ngkf.com. Newmark's reiterated annual guidance includes
the full impact of the items discussed in this document.
BGC Controlled Equity Offering
BGC funded the purchase
using proceeds from its Controlled Equity Offering
program7 ("CEO program"). Since December 19, 2017, BGC sold 19.4 million
newly-issued Class A common shares under the CEO program for net
proceeds of $270.9 million. While BGC
has generally used the proceeds from the CEO program principally to
facilitate the repurchase and/or redemption of BGC shares or units
in connection with the equity-based compensation of its partners
and employees, approximately $242.0
million of the gross proceeds were used to make the
investment in Newmark Units. BGC does not intend to invest in
additional shares, Units, or other share equivalents of Newmark for
the foreseeable future.
Share Counts and Ownership
Following issuance under
the CEO program, as well as shares and/or units issued with respect
to equity-based compensation, front-office hires, and/or
acquisitions, BGC's fully diluted share count is 482.7 million. BGC
continues to own 83.4% of the 138.6 million Class A common issued
and outstanding shares of Newmark and 100% of the 15.8 million
issued and outstanding Class B common shares of Newmark. Including
the newly issued Units, BGC now owns 59.2% of the 253.3 million fully
diluted shares of Newmark currently outstanding. The balance of
Newmark's fully diluted share count is owned by the public, Cantor,
partners, and employees.8 Because Newmark limited
partnership units are not entitled to a vote until they are
exchanged for Newmark common stock, BGC's voting power with respect
to Newmark has not changed.
Proposed Spin-Off of Newmark
BGC still expects to
pursue a distribution to its common stockholders of all of the
Class A common shares and Class B common shares of Newmark that BGC
then owns in a manner that is intended to qualify as generally
tax-free for U.S. federal income tax purposes. As currently
contemplated, shares of Class A common stock of Newmark held by BGC
would be distributed to the holders of shares of Class A common
stock of BGC, and shares of Class B common stock of Newmark held by
BGC would be distributed to the holders of shares of Class B common
stock of BGC. This spin-off would include any Newmark common shares
that BGC obtains as a result of the exchange of the Newmark Units
acquired by BGC in the transactions discussed above. The exact
ratio of Newmark common shares to be distributed in respect of each
BGC common share in the spin-off will depend on, among other
things, the number of BGC common shares outstanding and the number
of Newmark common shares (including Newmark common shares
underlying Newmark Units) owned by BGC as of the record date of the
spin-off.
The Newmark common shares owned by BGC prior to Newmark's IPO
are subject to a 180-day "lock-up" restriction contained in the
underwriting agreement for the IPO. The distribution is subject to
a number of conditions, and BGC may determine not to proceed with
the distribution if the BGC board of directors determines, in its
sole discretion, that the distribution is not in the best interest
of the Company and its stockholders. Accordingly, the distribution
may not occur on the expected timeframe, or at all. Please see the
section on "Certain Relationships and Related-Party
Transactions—Separation and Distribution Agreement—The
Distribution" in Newmark's final IPO prospectus filed with the U.S.
Securities and Exchange Commission for additional information
regarding the proposed distribution.
BGC's Non-GAAP Definitions
Please see BGC's financial
results press release issued on February 9,
2018, including the sections titled "Adjusted Earnings
Defined," "Differences between Consolidated Results for Adjusted
Earnings and GAAP," "Reconciliation of GAAP income (loss) to
Adjusted Earnings," "Adjusted EBITDA Defined," "Adjusted EBITDA
before allocations to units," and "Reconciliation of GAAP Income
(Loss) to Adjusted EBITDA" for the complete and revised definitions
of these non-GAAP terms and how, when and why management uses them,
as well as for the differences between results under GAAP and these
non-GAAP items for the periods discussed therein. This press
release can be found at http://ir.bgcpartners.com.
Newmark's Non-GAAP Definitions
Please see Newmark's
financial results press release issued on February 9, 2018, including the sections titled
"Adjusted Earnings Defined," "Differences between Consolidated
Results for Adjusted Earnings and GAAP," "Reconciliation of GAAP
income (loss) to adjusted earnings," "Adjusted EBITDA and Adjusted
EBITDA Before Allocations to Units Defined," and "Reconciliation of
GAAP Income (Loss) to Adjusted EBITDA" for the complete definitions
of these non-GAAP terms and how, when and why management uses them,
as well as for the differences between results under GAAP and these
non-GAAP items for the periods discussed therein. This press
release can be found at http://ir.ngkf.com.
About BGC Partners, Inc.
BGC Partners is a leading
global brokerage company servicing the financial and real estate
markets. BGC offers Real Estate Services through its publicly
traded subsidiary Newmark Group, Inc. BGC owns GFI Group Inc., a
leading intermediary and provider of trading technologies and
support services to the global OTC and listed markets. BGC's
Financial Services offerings include fixed income securities,
interest rate swaps, foreign exchange, equities, equity
derivatives, credit derivatives, commodities, futures, and
structured products. BGC provides a wide range of services,
including trade execution, broker-dealer services, clearing, trade
compression, post trade, information, and other services to a broad
range of financial and non-financial institutions. Through brands
including FENICS, BGC Trader, Capitalab, Lucera, and FENICS Market
Data, BGC offers financial technology solutions, market data, and
analytics related to numerous financial instruments and
markets.
BGC's customers include many of the world's largest banks,
broker-dealers, investment banks, trading firms, hedge funds,
governments, corporations, property owners, real estate developers,
and investment firms. BGC's common stock trades on the NASDAQ
Global Select Market under the ticker symbol (NASDAQ: BGCP). BGC
also has an outstanding bond issuance of Senior Notes due
June 15, 2042, which trade on the New
York Stock Exchange under the symbol (NYSE: BGCA). BGC Partners is
led by Chairman and Chief Executive Officer Howard W. Lutnick. For more information, please
visit http://www.bgcpartners.com. You can also follow BGC at
https://twitter.com/bgcpartners and/or
https://www.linkedin.com/company/bgc-partners.
About Newmark Group, Inc.
Newmark is a full-service
commercial real estate services business that offers a complete
suite of services and products for both owners and occupiers across
the entire commercial real estate industry. Newmark's
investor/owner services and products include capital markets
(including investment sales), agency leasing, property management,
valuation and advisory, diligence and underwriting and, under other
trademarks and names like Berkeley Point and NKF Capital Markets,
government sponsored enterprise lending, loan servicing, debt and
structured finance and loan sales. Newmark's occupier services and
products include tenant representation, global corporate services,
real estate management technology systems, workplace and occupancy
strategy, consulting, project management, lease administration and
facilities management. Newmark enhances these services and products
through innovative real estate technology solutions and data
analytics designed to enable its clients to increase their
efficiency and profits by optimizing their real estate portfolio.
Newmark has relationships with many of the world's largest
commercial property owners, real estate developers and investors,
as well as Fortune 500 and Forbes Global 2000 companies. Newmark's
Class A common stock trades on the NASDAQ Global Select Market
under the ticker symbol (NASDAQ: NMRK).
Note Regarding the Intellectual Property
BGC, BGC
Trader, GFI, FENICS, FENICS.COM, Capitalab, Swaptioniser, ColleX,
Newmark, Grubb & Ellis, ARA, Computerized Facility Integration,
Landauer, Lucera, and Excess Space, Excess Space Retail Services,
Inc., Berkeley Point and Grubb are trademarks/service marks, and/or
registered trademarks/service marks and/or service marks of Newmark
Group, Inc. and/or its affiliates. Knight Frank is a service mark
of Knight Frank (Nominees) Limited. Controlled Equity Offering is a
registered service mark of Cantor Fitzgerald & Co.
Discussion of Forward-Looking Statements about BGC Partners
and Newmark
Statements in this document regarding BGC and
Newmark that are not historical facts are "forward-looking
statements" that involve risks and uncertainties, which could cause
actual results to differ from those contained in the
forward-looking statements. Except as required by law, BGC and
Newmark undertake no obligation to update any forward-looking
statements. For a discussion of additional risks and uncertainties,
which could cause actual results to differ from those contained in
the forward-looking statements, see BGC's and Newmark's Securities
and Exchange Commission filings, including, but not limited to, the
risk factors set forth in these filings and any updates to such
risk factors contained in subsequent Forms 10-K, Forms 10-Q or
Forms 8-K.
1 See the section of this document called "Proposed
Spin-Off of Newmark."
2 For the purposes of this document, the term "BGC"
includes subsidiaries of BGC, and the term "Newmark" includes
subsidiaries of Newmark.
3 Pursuant to the underwriting agreement Newmark entered
in connection with its IPO, Newmark is generally restricted from
issuing shares of Newmark common stock for a period of 180 days
following the date of the final prospectus for the IPO, subject to
certain exceptions (which include shares of Newmark common stock
into which Newmark Holdings exchangeable limited partnership units
may be exchanged).
4 On September 8, 2017,
BGC acquired Berkeley Point Financial LLC, including its wholly
owned subsidiary Berkeley Point Capital LLC, which together are
referred to as "Berkeley Point" or "BPF." BPF became subsidiaries
of Newmark as part of the separation of Newmark from BGC. In
connection with the separation and prior to the closing of the IPO,
Newmark assumed from BGC a term loan, due September 8, 2019, that had an outstanding
principal amount of $575 million,
plus accrued but unpaid interest thereon. The term loan partially
financed the BPF acquisition.
5 For purposes of this document and for BGC's
consolidated results, "long-term debt" includes both long-term debt
and collateralized borrowings. By the end of the first quarter of
2018, Newmark will have repaid the outstanding balance of the term
loan as of year-end 2017 with cash on hand and the proceeds from
the sale of its Units described herein. As of December 31, 2017, BGC's consolidated long-term
debt was $1,650.5 million and
Newmark's stand-alone long-term debt was $1,083.2 million. As of March 31, 2018, the comparable figures are
expected to be approximately $1,376
million and $813 million,
respectively.
6 The ratios are expected to be below 2.5 times as
measured by long-term debt expected to be recorded as of
March 31, 2018 divided by either
Adjusted EBITDA for full year 2017 or by Adjusted EBITDA before
allocations to units for full year 2017, all else equal. The
interest paid on the term loan is based the following figures, all
as of December 31, 2017: an
outstanding principal amount of $270.7
million, plus accrued but unpaid interest thereon, with an
interest rate calculated based on one-month LIBOR plus 2.75%,
subject to adjustment, which was approximately 4.21% per annum.
7 Commonly referred to as an "An at-the-market (ATM)
offering."
8 In conjunction with the proposed spin-off of Newmark,
limited partnership units potentially exchangeable into common
class A shares of BGCP or NMRK are owned by employee/partners of
both Newmark and BGC. Going forward, partners of Newmark will be
compensated with Newmark partnership units and partners of BGC will
be compensated with BGC partnership units. Over time, virtually all
of the partners of Newmark are expected to only own units and/or
shares of Newmark and virtually all of the partners of BGC are
expected to only own units and/or shares of BGC. Cantor Fitzgerald,
L.P. ("Cantor") owns additional exchangeable limited partnership
units of both BGCP and NMRK.
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SOURCE BGC Partners, Inc.; Newmark Group, Inc.