RCS Capital Corporation (NYSE: RCAP) announced today that it has entered into an agreement to exchange RCS Capital’s existing Series A convertible preferred stock owned by Luxor Capital Group LP and its affiliates (“Luxor”) for a new series of perpetual preferred and a new series of convertible preferred stock. In connection with the exchange, Luxor will convert $40.0 million in aggregate liquidation preference of the existing Series A convertible preferred stock.
Pursuant to the new agreement and in conjunction with the conversion of the existing Series A convertible preferred noted above, Luxor will exchange its remaining Series A convertible preferred stock for $110.0 million liquidation preference of new, fixed-rate convertible preferred stock and $145.0 million liquidation preference of new perpetual preferred stock, after which the Series A convertible preferred stock will be retired.
CEO of RCS Capital, Michael Weil stated, “By eliminating the floating conversion price of our convertible preferred shares, we have mitigated the potential dilutive impact of those securities, simplified our capital structure, and provided greater clarity for all of our shareholders. Luxor Capital has been an important partner and our largest institutional investor, and we are pleased that they have agreed to enter into this arrangement to further emphasize their confidence in the long-term value of our platform and the significant growth prospects for the company. We continue to strategically position RCS Capital for success and we believe this transaction further underscores our commitment.”
The new convertible preferred stock will be entitled to a quarterly dividend of 7.00% per annum payable in cash, or 8.00% per annum if the dividend is not paid in cash on the dividend payment date. The new convertible preferred stock is convertible, at the option of the holder, into shares of RCS Capital’s Class A common stock at a fixed conversion price of $13.00 per share of Class A common stock. The stock will be entitled to a quarterly dividend of 11.00% per annum payable in cash, or 12.5% per annum if the dividend is not paid in cash on the dividend payment date.
Both new series of preferred equity will provide that, starting on the eighth anniversary of the issue date, RCS Capital will have a call right, and preferred equity holders will have a put right, pursuant to which all or a part of the outstanding preferred equity of each series may be redeemed for cash at the aggregate liquidation preference including accrued and unpaid dividends.
In addition, RCS Capital has the right to call, at any time until 18 months following the issue date, all, but not less than all, of the perpetual preferred stock at the liquidation preference (including accrued and unpaid dividends) for cash.