Barnes & Noble Education to receive $95M of new capital

Barnes & Noble Education (BNED) announced that it has entered into a definitive agreement with Immersion Corporation (IMMR) and certain of the company’s existing shareholders and strategic partners, on the terms of new equity and refinancing transactions that will strengthen BNED’s long-term financial position. Upon close, which is expected in June 2024: BNED will receive gross proceeds of $95M of new equity capital through a $50M new equity investment led by Immersion and a $45M fully backstopped equity rights offering; the transactions are expected to infuse approximately $75M of net cash proceeds after transaction costs. The company’s existing second lien lenders, affiliates of Fanatics, Lids, and VitalSource Technologies, will convert approximately $34M of outstanding principal and any accrued and unpaid interest into BNED common stock; and the company has received commitments to refinance its existing asset backed loan facility, pursuant to an agreement with its first lien holders, providing the company with access to a $325M facility maturing in 2028. The refinanced ABL Facility will meaningfully enhance BNED’s financial flexibility and reduce its annual interest expense. Through the Rights Offering, BNED plans to issue up to 900,000,000 shares of its Common Stock at a cash subscription price of 5c per share. In the Rights Offering, BNED will distribute to each holder of its Common Stock on the record date one non-transferable Right, for every share of Common Stock owned by such holder on the record date, and each Subscription Right will entitle the holder to purchase the number of shares of Common Stock determined by dividing 900,000,000 by the total number of shares of Common Stock outstanding on the record date. Each holder that fully exercises their Subscription Rights will be entitled to Over-Subscription Rights to subscribe for additional shares of Common Stock that remain unsubscribed as a result of any unexercised Subscription Rights, which allows such holder to subscribe for additional shares of Common Stock up to the number of shares purchased under such holder’s basic Subscription Right at 5c per share. Pursuant to the terms and conditions of the Purchase Agreement, if any Subscription Rights remain unexercised upon the expiration of the Rights Offering after accounting for all Over-Subscription Rights exercised, the standby purchasers will collectively purchase, at the Subscription Price, up to $45M in shares of Common Stock not subscribed for by the company’s stockholders. Upon closing of the Rights Offering and in addition to the Backstop Commitment, investors led by Immersion, have agreed through the Private Investment to purchase an aggregate of $50M in shares of the company’s Common Stock, at the Subscription Price, in a private placement exempt from the registration requirements under the Securities Act of 1933, as amended. The company intends to use approximately $20M of the proceeds from the Rights Offering and Private Investment to fund transaction-related costs. The company maintains the strong support of its Second Lien Lenders, who will convert all outstanding principal and any accrued and unpaid interest, totaling approximately $34M under the Term Credit Agreement into a number of new shares of Common Stock equal to the quotient of the Debt Amount divided by the Subscription Price. In conjunction with the close of the Rights Offering and Private Investment, BNED has received commitments to refinance its existing ABL Facility pursuant to an agreement with its first lien holders. The new $325M ABL Facility will mature in June 2028 and will eliminate or modify the existing debt covenants to provide greater financial and operating flexibility. The ABL Facility will initially have an applicable margin with respect to the interest rate of 3.50% per annum, in the case of interest accruing based on a Secured Overnight Financing Rate, and 2.5%, in the case of interest accruing based on an alternative base rate. Following the one-year anniversary, the applicable margin shall be reduced one time by 25 basis points per annum if certain financial metrics are met. On April 16, 2024, BNED also entered into an amendment to its credit agreement to amend certain financial covenants to provide additional financial flexibility ahead of the transactions expected closing date in June.