Capital One, National Association provides capital at LIBOR + 1.75% – 2.50% to replace Company’s more expensive Series A Preferred stock dividends and costs
LAS VEGAS, July 8, 2021 – Rimini Street, Inc. (Nasdaq: RMNI), a global provider of enterprise software products and services, the leading third-party support provider for Oracle and SAP software products and a Salesforce partner, today announced it has entered into a definitive agreement for a $90 million senior secured credit facility with approximately $88 million of the borrowings to be used for the full redemption of the remaining Series A Preferred stock and the remainder of the borrowings for related transaction costs and other general corporate purposes. Loan funding and redemption of the Series A Preferred stock are currently expected to occur on July 20, 2021, subject to customary funding conditions.
“Capital One is pleased to lead the recently closed $90 million term loan with Rimini Street, an industry leading technology services provider that is a valued solutions partner to Capital One,” said Tom King, managing director, Capital One Technology, Media and Telecom Banking. “The new financing bolsters Rimini Street’s capital structure and supports the company's strategic plans. The expanded relationship through Capital One’s Technology, Media and Telecom corporate banking group builds upon several years of a successful partnership between the two organizations.”
Key Financing Terms
Loans made under the five-year term loan will bear interest at LIBOR plus a margin ranging from 1.75% to 2.50%. The margin for the credit facility is subject to leverage-based step downs. The credit facility contains certain financial covenants, including maintenance of a minimum fixed charge coverage ratio, a total leverage ratio below a threshold and a minimum liquidity of $20 million in U.S. cash. Annual minimum principal amortization payments across the five-year term will be 5%, 5%, 7.5%, 7.5%, 10%, with the remaining balance due at the end of the term. The loans under the credit facility contain affirmative and negative covenants customary for transactions of this type and there is no prepayment premium during the term of the loan.
For more information on the terms of the credit agreement please see the Company’s Current Report on SEC Form 8-K, filed July 8, 2021.
When combining the financial impacts of this new $90 million bank loan financing, the March 2021 Common stock offering, the previous Series A Preferred stock buybacks totaling $75 million completed from October 2020 – April 2021 and the planned buyback of the remaining Series A Preferred stock of approximately $88 million, the Company expects the first year interest and accretion of discount to be approximately $3 million compared to the 2020 full year cost of the Series A Preferred stock of $27 million, yielding a savings of approximately $24 million.
Additionally, the buyback of the remaining Series A Preferred stock will reduce the Company’s fully diluted shares of Common stock outstanding by approximately 9%, or 8.8 million Common shares.
The combination of cash savings and a reduction in fully diluted shares of Common stock outstanding should yield a meaningful increase in earnings per share.
“This transaction significantly reduces our cost of capital and is accretive to earnings per share,” said Seth A. Ravin, CEO and chairman of the board. “This $90 million commercial bank financing achieves our long-stated goals of obtaining competitive market rates for capital, reducing financing costs and dividend obligations and providing operational flexibility that supports accelerating growth and capital return options. We want to thank our Series A Preferred stockholders for their partnership and we are pleased to be working with our new financial partner, Capital One bank.”
Capital One, National Association acted as sole lead arranger and bookrunner and Cowen served as exclusive financial advisor. Baker McKenzie LLP acted as legal counsel to Rimini Street and Paul Hastings LLP acted as legal counsel to Capital One, National Association.