As one example, if the Transactions are not approved and the interim financing is not repaid as part of their closing, the payment premium on the interim financing rises from 1.05x to 1.20x. It appears that in light of the Transactions requiring formal stockholder approval at the Company’s upcoming special meeting of stockholders, the Company and Conversant have structured the interim financing to be as coercive to stockholders as possible to obtain approval. Covenants and consent requirements prior to and following closing of the Transactions that prohibit the Company from taking various actions without Conversant’s consent, giving Conversant effective control of the Company in certain business-critical respects.
ORTELIUS ADVISORS PRO
The commitment from Conversant to backstop $42.5 million of an approximately $70 million Common Stock rights offering to existing stockholders at $32.00 per share, to be funded through the issuance of additional Preferred Stock to Conversant and potentially by Conversant deeming the interim financing repaid.The exceedingly costly interim debt financing from Conversant of approximately $17.3 million, with a headline interest rate of 15% and approximately $2.3 million earmarked to pay Conversant’s costs and expenses, and with a payment premium to give Conversant a capital return of 1.05x to 1.20x on top of accrued interest.
ORTELIUS ADVISORS SERIES
A highly-dilutive $82.5 million private placement of newly created Series A Convertible Preferred Stock (the “Preferred Stock”) that will accrue preferred dividends at a rate of 11% to 15%, and will be convertible into Common Stock at an initial conversion price of $40.00 per share, which is a 16% discount to the 30-trading day VWAP ending July 21, the day before the announcement of the Transactions.To make our concerns abundantly clear, we have highlighted some of the more troubling terms associated with the proposed Transactions and this de facto handover of the business to Conversant. The Company itself, in its earnings call on May 13 th, indicated that occupancy and financial metrics were improving, long-term demographic tailwinds remained intact, and that the hard work of its “three-year transformational strategy” to stabilize the business was “complete.”įundamentally, we believe there are other stockholders like Ortelius who not only oppose this transaction, but also stand ready, willing and able to assist the Company with its near-term capital needs and other strategic initiatives in light of the Company’s tremendous long-term potential. Surely the Board is aware that we are now in the late innings of the pandemic and the industry is in recovery. We find it alarming that the Board, which owes fiduciary obligations to all stockholders, would effectively seek to sell control of the Company to Conversant at what we believe is a material discount without at least conducting a more thorough review of strategic alternatives. The Transactions demonstrably fail to maximize the value of the Company, which is now trading at a significant discount to its underlying assets. 1 The market evidently recognizes that these highly-questionable Transactions include egregious terms, which effectively hand control of CSU to Conversant while punitively diluting existing stockholders and hindering the business with excessive costs. We are writing to make you aware that Ortelius strongly opposes CSU’s recently announced transactions (the “Transactions”) with Conversant Capital LLC (together with its affiliates, “Conversant”).īased on the market’s overwhelmingly negative reaction in recent weeks, we believe other stockholders share our view: the Company’s stock price has plunged an incredible 48% since the Transactions were announced on July 2 2 nd. (together with its affiliates, “Ortelius” or “we”) is one of the largest stockholders of Capital Senior Living Corporation (“CSU” or the “Company”), with holdings equal to approximately 9% of the Company’s outstanding common stock (the “Common Stock”). (together with its affiliates, “Ortelius” or “we”) today issued the below letter to the Board of Directors of Capital Senior Living Corporation (NYSE: CSU).Ĭhairman Reid and Members of the Board of Directors:
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