Item 1.01 Entry into a Material Definitive
Agreement.
Securitization of Receivables
On November 23, 2021, affiliates of Conn’s, Inc. (the
“Company”) completed a securitization transaction (the “Securitization Transaction”),
which involved the issuance and sale in a private offering of 1.05% $247,830,000 Asset Backed Fixed Rate Notes, Class A, Series 2021-A,
due May 15, 2026 (the “Class A Notes”), 2.87% $66,090,000 Asset Backed Fixed Rate Notes, Class B,
Series 2021-A, due May 15, 2026 (the “Class B Notes”), and 4.59% $63,890,000 Asset Backed Fixed
Rate Notes, Class C, Series 2021-A, due May 15, 2026 (the “Class C Notes” and, together
with the Class A Notes and the Class B Notes, the “Purchased Notes”), and the issuance of Asset Backed
Notes, Class R, Series 2021-A (the “Class R Notes” and, collectively with the Purchased Notes,
the “Series 2021-A Notes”). The Series 2021-A Notes were issued by Conn’s Receivables Funding
2021-A, LLC, a newly formed special purpose entity that is indirectly owned by the Company (the “Issuer”). The
Series 2021-A Notes are secured by a portfolio of approximately $440,589,596.20 of customer receivables sold and contributed from
the Company’s loan portfolio indirectly to Conn’s Receivables 2021-A Trust (the “Receivables Trust”),
a newly formed Delaware statutory trust. Net proceeds from the offering (after deducting the underwriting discount payable to the Initial
Purchasers) were $377,787,530.57 and will be used to repay indebtedness under the Company’s asset-based credit facility and for
other general corporate purposes.
Fitch Ratings, Inc. (“Fitch”) has rated
the Class A Notes, the Class B Notes and the Class C Notes as follows: the Class A Notes, “BBBsf” by Fitch;
the Class B Notes, “BBsf” by Fitch and the Class C Notes, “Bsf” by Fitch. 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, LP, 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 Company’s subsidiaries)
to Conn Appliances Receivables Funding, LLC, an indirect wholly owned subsidiary of the Company (the “Depositor”),
pursuant to a First Receivables Purchase Agreement, dated as of November 23, 2021, by and between the Seller and the Depositor (the
“First Purchase Agreement”). The Depositor then contributed the Contracts to the Receivables Trust pursuant
to a Second Receivables Purchase Agreement, dated as of November 23, 2021, by and between the Depositor and the Receivables Trust
(the “Second Purchase Agreement”). The Receivables Trust issued a certificate to the Depositor representing
a 100% interest in the Receivables Trust (the “Receivables Trust Certificate”) and the Receivables Trust Certificate
was sold by the Depositor to the Issuer pursuant to a Purchase and Sale Agreement, dated November 23, 2021, by and between the Depositor
and the 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 Series 2021-A 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 Series 2021-A Notes were issued by the Issuer pursuant to
a Base Indenture, dated November 23, 2021, by and between the Issuer and the Trustee (the “Base Indenture”),
and a Series 2021-A Supplement to the Base Indenture, dated as of November 23, 2021, by and between the Issuer and the Trustee
(the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”).
The Series 2021-A Notes mature on May 15, 2026.
The Purchased Notes were sold initially to MUFG Securities Americas
Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC (collectively, the “Initial Purchasers”)
and then reoffered and resold only (i) to “Qualified Institutional Buyers” as defined in Rule 144A (“Rule 144A”)
under the Securities Act of 1933, as amended (the “Securities Act”) in transactions meeting the requirements
of Rule 144A or (2) solely with respect to the Class A Notes, outside the United States to non-U.S. Persons in transactions
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 (the “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 Purchased Notes are subject to redemption by 100% of the holders
of the Class R Notes, at their option, in accordance with the terms specified in the Indenture, on any business day, as of the last
day of the previous monthly period, the balance of outstanding receivables under the Contracts has declined to 15% or less of the balance
of outstanding receivables under the Contracts as of October 31, 2021 (the “Optional Redemption”). The
Servicer will have the option to purchase (the “Optional Purchase”) the Contracts and certain other assets of
the Receivables Trust for an amount equal to the fair market value of such assets from the Issuer on any business day if, as of the last
day of the previous 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 October 31, 2021. 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 Series 2021-A Notes and the aggregate unpaid principal,
if any, of all of the outstanding Series 2021-A Notes plus other contractual fees and expenses of the Servicer, the Trustee and certain
other service providers in connection with the Securitization Transaction and the Issuer.
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 business day then or thereafter,
in whole but not in part, at the option of 100% 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 100.25% of the outstanding principal amount, if any, of the Class B Notes and (ii) for the
Class C Notes, equal to 100.50% 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 prepayment occurs,
plus (c) any other amounts due and owing by the Issuer to other parties pursuant to the Securization Transaction documents; 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 the foregoing (a) and (b).
If certain events of default were to occur under the Indenture, the
Trustee may, and at the direction of the required noteholders, shall cause the principal amount of all of the Purchased Notes outstanding
to be immediately due and payable at par, together with interest thereon. Events of default under the Indenture include, but are not limited
to, events such as failure to make required payments on the Series 2021-A Notes or specified bankruptcy-related events. If an event
of default related to specified bankruptcy-related events were to occur under the Indenture, all unpaid principal of and accrued interest,
if applicable, on all the Purchased Notes outstanding shall become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any noteholder.
The Servicer is responsible for servicing the receivables transferred
to the Receivables Trust pursuant to a Servicing Agreement, dated as of November 23, 2021 (the “Servicing Agreement”)
by and among the Issuer, the Receivables Trust, the Servicer and the Trustee. Under the Servicing Agreement, the Servicer will receive
a monthly service fee equal to 4.75% (annualized) based on the outstanding balance of Contracts and certain other assets of the Receivables
Trust. If Servicer defaults on its obligations under the Servicing Agreement, it may, and under certain circumstances will, be terminated
and replaced as servicer.
The foregoing descriptions of 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 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.