i3 Verticals, Inc. (Nasdaq: IIIV) (the “Company”) announced
today that i3 Verticals, LLC (the “Issuer”), a subsidiary of the
Company, has closed its offering of $138 million aggregate
principal amount of 1.00% Exchangeable Senior Notes due 2025 (the
“Exchangeable Notes”), including the full exercise of the $18
million aggregate principal amount of Exchangeable Notes pursuant
to the initial purchasers’ right to purchase additional
Exchangeable Notes.
The Exchangeable Notes are general senior unsecured obligations
of the Issuer, guaranteed by the Company, and bear interest at a
fixed rate of 1.00% per year, payable semiannually in arrears on
February 15 and August 15 of each year, beginning on August 15,
2020.
The Exchangeable Notes will mature on February 15, 2025, unless
earlier exchanged, repurchased or redeemed. Prior to the close of
business on the business day immediately preceding August 15, 2024,
the Exchangeable Notes are exchangeable only upon satisfaction of
certain conditions and during certain periods, and thereafter, the
Exchangeable Notes are exchangeable at any time until the close of
business on the second scheduled trading day immediately preceding
the maturity date. The Exchangeable Notes are exchangeable on the
terms set forth in the indenture into cash, shares of Class A
common stock, $0.0001 par value per share of the Company (“Class A
common stock”), or a combination of cash and Class A common stock,
at the Issuer’s election.
The exchange rate is initially 24.4666 shares of Class A common
stock per $1,000 principal amount of Exchangeable Notes (equivalent
to an initial exchange price of approximately $40.87 per share of
Class A common stock). The initial exchange price of the
Exchangeable Notes represents a premium of approximately 30.00% to
the $31.44 closing price of the Class A common stock on the Nasdaq
Global Select Market on February 12, 2020, the pricing date. The
exchange rate is subject to adjustment in some events. In addition,
following certain corporate events that occur prior to the maturity
date or the Issuer’s delivery of a notice of redemption, the Issuer
will increase, in certain circumstances, the exchange rate for a
holder who elects to exchange its Exchangeable Notes in connection
with such a corporate event or notice of redemption, as the case
may be.
If a fundamental change occurs, holders may require the Issuer
to repurchase for cash all or part of their Exchangeable Notes at a
repurchase price equal to 100% of the principal amount of the
Exchangeable Notes to be repurchased, plus accrued and unpaid
interest to, but not including, the fundamental change repurchase
date.
The Issuer may not otherwise redeem the Exchangeable Notes prior
to February 20, 2023. On or after February 20, 2023, and prior to
the 47th scheduled trading day immediately preceding the maturity
date, if the last reported sale price per share of Class A common
stock has been at least 130% of the exchange price for the
Exchangeable Notes for certain specified periods, the Issuer may
redeem all or any portion of the Exchangeable Notes then in effect
for a cash redemption price that is equal to 100% of the principal
amount of the Exchangeable Notes to be redeemed plus accrued and
unpaid interest on such note to, but not including, the redemption
date. The Issuer will, under certain circumstances, increase the
exchange rate in respect of notes called for redemption.
In addition, the Company and the Issuer have entered into an
amendment to the Company’s credit agreement to permit the issuance
of the Exchangeable Notes and the Issuer’s and the Company’s
entrance into the exchangeable note hedge and warrant transactions
described below in connection with the offering of the Exchangeable
Notes. The amendment to the credit agreement provides for, among
other things:
- the issuance of the Exchangeable Notes and the related
exchangeable note hedge and warrant transactions;
- a decrease in the maximum amount of the Revolving Credit
Facility to $275 million;
- certain changes in the financial covenants in the credit
agreement; and
- certain permitted uses of the proceeds of the Issuer’s
revolving credit facility in connection with the Exchangeable
Notes.
The Issuer will use a portion of the net proceeds of the
offering to pay the cost of the exchangeable note hedge
transactions described below (such cost net of the proceeds
received by the Company upon sale of the warrant transactions
described below) and to pay down outstanding borrowings under its
senior secured credit facility in connection with the effectiveness
of the operative provisions of the previously announced amendment
to the credit agreement.
In connection with the Exchangeable Notes offering, the Issuer
has entered into privately negotiated exchangeable note hedge
transactions with certain financial institutions (the “option
counterparties”). The exchangeable note hedge transactions cover,
subject to customary anti-dilution adjustments substantially
similar to those applicable to the Exchangeable Notes, the same
number of shares of Class A common stock that initially underlie
the Exchangeable Notes. The exchangeable note hedge transactions
are expected generally to reduce potential dilution to the Class A
common stock and/or offset potential cash payments the Issuer is
required to make in excess of the principal amount, in each case,
upon any exchange of the Exchangeable Notes. Concurrently with the
Issuer’s entry into the exchangeable note hedge transactions, the
Company has entered into warrant transactions with the option
counterparties relating to the same number of shares of Class A
common stock, subject to customary anti-dilution adjustments. These
warrant transactions could separately have a dilutive effect on the
Class A common stock to the extent that the market price per share
of Class A common stock exceeds the applicable strike price of the
warrants on one or more of the applicable expiration dates unless,
subject to the terms of the warrant transactions, the Company
elects to cash settle the warrants.
In connection with establishing their initial hedges of the
exchangeable note hedge transactions and warrant transactions, the
option counterparties and/or their respective affiliates have
advised the Issuer and the Company that they expect to purchase
Class A common stock or other securities of the Company in
secondary market transactions and/or enter into various derivative
transactions with respect to the Class A common stock concurrently
with or shortly after the pricing of the Exchangeable Notes,
including with certain investors in the Exchangeable Notes. This
activity could increase (or reduce the size of any decrease in) the
market price of Class A common stock or the Exchangeable Notes at
that time. In addition, the option counterparties and/or their
respective affiliates may modify their hedge positions by entering
into or unwinding various derivatives with respect to the Class A
common stock and/or purchasing or selling shares of Class A common
stock or other securities of the Company in secondary market
transactions following the pricing of the Exchangeable Notes and
prior to the maturity of the Exchangeable Notes (and are likely to
do so following exchange of the Exchangeable Notes, during any
observation period related to an exchange of the Exchangeable Notes
or upon any repurchase of Exchangeable Notes by the Issuer (whether
upon a fundamental change or otherwise)). The effect, if any, of
these activities on the market price of the Class A common stock or
the Exchangeable Notes will depend in part on market conditions and
cannot be ascertained at this time, but any of these activities
could cause or prevent an increase or a decline in the market price
of the Class A common stock or the Exchangeable Notes, which could
affect the ability of noteholders to exchange Exchangeable Notes
and could also affect the amount of cash and/or the number and
value of the shares of Class A common stock noteholders receive
upon exchange of the Exchangeable Notes.
The Exchangeable Notes will not be registered under the
Securities Act of 1933, as amended (the “Securities Act”), or any
state securities laws, and may not be offered or sold in the United
States absent registration or an applicable exemption from
registration under the Securities Act or any applicable state
securities laws. The Exchangeable Notes were offered only to
persons reasonably believed to be qualified institutional buyers
under Rule 144A under the Securities Act. The Company has agreed to
file a registration statement covering resales of the shares of
Class A common stock issuable upon exchange of the Exchangeable
Notes with the Securities and Exchange Commission (the “SEC”).
This press release does not constitute an offer to sell, or a
solicitation of an offer to buy, nor shall there be any sale of
these securities in any state or jurisdiction in which such an
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state or
jurisdiction.
About i3 Verticals
Helping drive the convergence of software and payments, i3
Verticals delivers seamlessly integrated payment and software
solutions to small- and medium-sized businesses and other
organizations in strategic vertical markets, such as education,
non-profit, public sector, property management, and healthcare and
to the business-to-business payments market. With a broad suite of
payment and software solutions that address the specific needs of
its clients in each strategic vertical market, i3 Verticals
processed approximately $13.1 billion in total payment volume for
the year ended September 30, 2019.
Forward-Looking Statements
This release contains forward-looking statements that are
subject to risks and uncertainties. All statements other than
statements of historical fact or relating to present facts or
current conditions included in this release are forward-looking
statements, including any statements regarding guidance and
statements of a general economic or industry specific nature.
Forward-looking statements give the Company's current expectations
and projections relating to its financial condition, results of
operations, guidance, plans, objectives, future performance and
business. You can identify forward-looking statements by the fact
that they do not relate strictly to historical or current facts.
These statements may include words such as “anticipate,”
“estimate,” “expect,” “project,” “plan,” “intend,” “believe,”
“may,” “will,” “should,” “could have,” “exceed,” “significantly,”
“likely” and other words and terms of similar meaning in connection
with any discussion of the timing or nature of future operating or
financial performance or other events.
The forward-looking statements contained in this release are
based on assumptions that we have made in light of the Company’s
industry experience and its perceptions of historical trends,
current conditions, expected future developments and other factors
we believe are appropriate under the circumstances. As you review
and consider information presented herein, you should understand
that these statements are not guarantees of future performance or
results. They depend upon future events and are subject to risks,
uncertainties (many of which are beyond the Company's control) and
assumptions. Although we believe that these forward-looking
statements are based on reasonable assumptions, you should be aware
that many factors could affect the Company's actual future
performance or results and cause them to differ materially from
those anticipated in the forward-looking statements. Certain of
these factors and other risks are discussed in the Company's
filings with the U.S. Securities and Exchange Commission (the
“SEC”) and include, but are not limited to: (i) the ability to
generate revenues sufficient to maintain profitability and positive
cash flow; (ii) competition in the Company's industry and the
ability to compete effectively; (iii) the dependence on
non-exclusive distribution partners to market the Company's
products and services; (iv) the ability to keep pace with rapid
developments and changes in the Company's industry and provide new
products and services; (v) liability and reputation damage from
unauthorized disclosure, destruction or modification of data or
disruption of the Company's services; (vi) technical, operational
and regulatory risks related to the Company's information
technology systems and third-party providers’ systems; (vii)
reliance on third parties for significant services; (viii) exposure
to economic conditions and political risks affecting consumer and
commercial spending, including the use of credit cards; (ix) the
ability to increase the Company's existing vertical markets, expand
into new vertical markets and execute the Company's growth
strategy; (x) the ability to successfully identify acquisition
targets and thereafter to complete and effectively integrate those
acquisitions into the Company’s services; (xi) potential
degradation of the quality of the Company's products, services and
support; (xii) the ability to retain clients, many of which are
small- and medium-sized businesses, which can be difficult and
costly to retain; (xiii) the Company's ability to successfully
manage its intellectual property; (xiv) the ability to attract,
recruit, retain and develop key personnel and qualified employees;
(xv) risks related to laws, regulations and industry standards;
(xvi) the Company's indebtedness and potential increases in its
indebtedness; (xvii) operating and financial restrictions imposed
by the Company's senior secured credit facility; (xviii) the
Company’s ability to access debt and equity capital markets; and
(xix) the risk factors included in the Company's Annual Report on
Form 10-K for the year ended September 30, 2019. Should one or more
of these risks or uncertainties materialize, or should any of these
assumptions prove incorrect, the Company's actual results may vary
in material respects from those projected in these forward-looking
statements.
Any forward-looking statement made by us in this release speaks
only as of the date of this release. Factors or events that could
cause the Company's actual results to differ may emerge from time
to time, and it is not possible for us to predict all of them. The
Company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by
law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200218006147/en/
Clay Whitson Chief Financial Officer (615) 988-9890
cwhitson@i3verticals.com
Paul Maple General Counsel (615) 465-4487
pmaple@i3verticals.com
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