Rimini Street, a global provider of enterprise software products and services, a third-party support provider for Oracle and SAP software products and a Salesforce partner, entered into a definitive agreement for a $90 million senior secured credit facility with Capital One, which is acting as sole lead arranger and bookrunner. The facility is structured as a five-year term loan.
Rimini Street will use approximately $88 million of the borrowings for the full redemption of its 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, 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,” Tom King, managing director of technology, media and telecom banking at Capital One, said. “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.”
Loans made under the term loan will bear interest at LIBOR plus a margin ranging from 1.75% to 2.5%. 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% and 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.
When combining the financial impacts of this new $90 million bank loan financing, the firm’s March 2021 common stock offering, the firm’s previous Series A preferred stock buybacks totaling $75 million and the firm’s planned buyback of the remaining Series A preferred stock of approximately $88 million, Rimini Street expects the first year interest and accretion of discount to be approximately $3 million compared with 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.
“This transaction significantly reduces our cost of capital and is accretive to earnings per share,” Seth A. Ravin, CEO and chairman of the board for Rimini Street, said. “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.”
Cowen served as exclusive financial advisor to Rimini Street on this transaction. Baker McKenzie acted as legal counsel to Rimini Street and Paul Hastings acted as legal counsel to Capital One.