Regions Bank acted as administrative agent on new five-year $125 million secured credit facilities, consisting of a $75 million term loan and a $50 million revolving credit facility, for Heritage Insurance Holdings, a property and casualty insurance holding company.
Regions Capital Markets acted as left lead arranger and joint book runner on the new credit facilities, while Regions Securities acted as sole financial advisor on the transactions. Stonybrook Capital acted as an advisor to Heritage.
Heritage intends to use proceeds of its new credit facilities, along with other funds, to redeem the $79.5 million principal amount of its outstanding senior secured notes and to repurchase the $72.7 million principal amount of its outstanding convertible senior notes. The convertible note repurchases are being made pursuant to privately-negotiated exchange agreements, with all such transactions expected to close on or before December 21, 2018. At closing, the convertible note holders will receive a combination of cash and an aggregate of 3,595,452 shares of the Company’s common stock.
Following the closing of the exchange agreements announced today, the company’s quarter-to-date repurchases of convertible notes will total $75.8 million in principal amount.
“Improving our capital structure and retiring our convertible notes has been a key focus over the past year and these transactions are a significant enhancement,” said Bruce Lucas, Heritage chairman and CEO. “Our new capital structure reduces debt service by almost 50% on favorable terms and conditions and will generate higher net income for the company for the forseeable future.
“Our convertible notes have acted as an overhang on our share price due to the short positions associated with the convertible notes. We issued sufficient shares to cover these short positions, which should eliminate over 90% of the short interest in our common stock. Preserving book value and earnings per share expectations was an important consideration. Although 3.6 million shares were issued, these shares generate significant net income from debt service savings. As a result, we expect a slight impact to book value per share in the quarter, and an even smaller impact to earnings per share for 2019. This transaction also reduces volatility in our share count, reduces future dilution, lowers our financial leverage, and increases tangible book value per share.”