Viad Corp closed on an agreement with funds managed by private equity firm Crestview Partners for the private placement of up to $180 million of preferred stock, and an agreement with its lender group to enhance its financial flexibility for the next eight fiscal quarters.
Crestview Partners made an initial investment of $135 million in newly-issued perpetual convertible preferred stock that carries a 5.5% dividend, which is payable in cash or in-kind at the company’s option. The preferred stock is convertible into shares of Viad common stock at a conversion price of $21.25 per share, representing a premium of 42% to Viad’s 10-trading day volume-weighted average price. The agreement also includes a delayed draw commitment of up to $45 million that Viad may access during the next 12 months at the same terms as the initial investment.
“Since the global COVID-19 pandemic began, we have taken proactive measures to ensure that Viad is sufficiently capitalized to withstand this downturn and emerge in a position of strength, with Pursuit poised to continue on its pre-COVID growth trajectory,” Steve Moster, president and CEO of Viad Corp, said. “I am happy to report that we have secured additional capital of up to $180 million from Crestview and longer-term financial covenant relief on our existing credit facility until the end of the third quarter of 2022.
“We believe that the investment from Crestview and amended credit facility provide us with ample financial flexibility and strength to not only endure what may be a slow recovery within the event industry and a gradual return to normal levels of leisure travel, but also to capitalize on growth opportunities in the global travel and hospitality market through Pursuit’s Refresh, Build, Buy strategy.”
On an as-converted basis, Crestview owns approximately 23.7% of the pro forma common shares outstanding with its initial investment of $135 million. In connection with Crestview’s investment, Brian Cassidy, partner and head of Media at Crestview, and Kevin Rabbitt, operating executive of Crestview, joined Viad’s board of directors, increasing the size of the board from seven to nine members.
“We are impressed by the leadership positions and competitive advantages of Viad’s businesses and the management teams running them led by Steve Moster and David Barry, particularly during this very difficult period,” Cassidy said. “Pursuit is on an exciting and accretive growth trajectory and has a clear path to global leadership in a growing market with high barriers to entry. GES is well positioned to take advantage of its leading position as in-person events return to emerge as a more focused and stronger platform for sustained growth and high free cash flow generation. Crestview’s investment in Viad underscores our confidence in the long-term value inherent in businesses that leverage the enduring allure of unique travel experiences and the power of face-to-face events, and we look forward to being partners with management and the company for years to come.”
The proceeds from Crestview’s initial investment will be used to repay a portion of Viad’s revolver borrowings, provide additional short-term liquidity, fund capital expenditures and support general corporate purposes. On a pro forma basis, Viad’s liquidity position at June 30, 2020 would have been approximately $340 million when factoring in the total $180 million investment commitment from Crestview and $17 million of proceeds received in July from the sale of a GES warehouse less fees and expenses related to the equity raise and credit facility amendment.
The terms of Viad’s amended revolving credit facility provide for the waiver of existing leverage ratio and interest coverage tests until Q3/22. During the covenant waiver period, the company is required to maintain minimum liquidity of $125 million with a step down to $100 million at December 31, 2020, the interest rate on borrowings under the revolver is equal to LIBOR plus 350 basis points, and Viad will be precluded from paying cash dividends. Additionally, a LIBOR floor of 1% will apply for the duration of the credit agreement. The amended credit agreement also allows Viad to make acquisitions under certain conditions.
Viad was represented in the transaction by Moelis & Company as placement agent and Latham & Watkins as legal advisor. Crestview was represented by Jefferies Group and Paul, Weiss, Rifkind, Wharton & Garrison served as legal advisor.
