i3 Verticals, Inc. (Nasdaq: IIIV) (the “Company”) announced today
that i3 Verticals, LLC (the “Issuer”), a subsidiary of the Company,
has priced its previously announced offering of $120 million
aggregate principal amount of 1.00% exchangeable senior notes due
2025 (the “Exchangeable Notes”).
The Issuer granted to the initial purchasers of
the Exchangeable Notes a right to purchase up to an additional $18
million aggregate principal amount of the Exchangeable Notes during
a 13-day period beginning on, and including, the first day on which
the Exchangeable Notes are issued. The offering is expected to
settle on February 18, 2020, subject to customary closing
conditions.
The Exchangeable Notes will be general senior
unsecured obligations of the Issuer, guaranteed by the Company and
will 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 will be exchangeable only
upon satisfaction of certain conditions and during certain periods,
and thereafter, the Exchangeable Notes will be exchangeable at any
time until the close of business on the second scheduled trading
day immediately preceding the maturity date. The Exchangeable Notes
will be 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 exchange rate will be 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 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.
The Issuer intends to 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. If the initial purchasers exercise their
right to purchase additional Exchangeable Notes, the Issuer intends
to repay additional outstanding debt under its senior secured
credit facility. In addition, the Issuer intends to enter into
additional exchangeable note hedge transactions with the option
counterparties (as defined below) and the Company intends to enter
into additional warrant transactions with the option
counterparties.
In connection with the pricing of the
Exchangeable Notes, the Issuer has entered into privately
negotiated exchangeable note hedge transactions with one or more of
the initial purchasers and/or their respective affiliates and/or
other 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 will be 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 VerticalsHelping 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 StatementsThis
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.
Contacts: |
|
|
Clay Whitson |
|
Paul Maple |
Chief Financial Officer |
|
General Counsel |
(615) 988-9890 |
|
(615) 465-4487 |
cwhitson@i3verticals.com |
|
pmaple@i3verticals.com |
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