S-1: Abacus Life Seeks to Bolster Balance Sheet with Additional Senior Notes Offering

Abacus Life, Inc. plans to offer additional 9.875% fixed-rate senior notes due 2028 to refinance debt and for general corporate purposes.

Summary

• Abacus Life, Inc. is offering additional senior notes due in 2028.
• The notes will have an interest rate of 9.875% per annum, payable quarterly.
• The notes will be fully fungible with existing notes under the same CUSIP and ISIN numbers.
• The aggregate principal amount of senior notes outstanding after the offering will be $.
• The company may redeem the notes on or after February 15, 2027, at 100% of the principal amount plus accrued interest.
• Holders can require the company to repurchase the notes upon a Change of Control Repurchase Event at 100% of the principal amount plus accrued interest.
• The notes are senior unsecured obligations, ranking equally with other senior unsecured debt.
• The company intends to use the net proceeds to refinance other outstanding indebtedness and for general corporate purposes.
• The company expects its financial results for the year ended December 31, 2023 to be consistent with the company's expectations with a forecasted range of Adjusted EBITDA of $35 million to $41 million.

Sentiment

Score: 6

Explanation: The document is generally neutral, outlining the terms of a debt offering. While it highlights potential benefits for the company, it also acknowledges the associated risks. The sentiment is slightly positive due to the company's growth and market position.

Positives

• The offering provides Abacus Life with additional capital for refinancing debt and general corporate purposes.
• The notes are fully fungible with existing notes, simplifying trading and tax implications.
• The company has the option to redeem the notes, providing flexibility in managing its debt.
• The company expects its financial results for the year ended December 31, 2023 to be consistent with the company's expectations with a forecasted range of Adjusted EBITDA of $35 million to $41 million.

Negatives

• The notes are unsecured and effectively subordinated to any secured indebtedness.
• The notes are structurally subordinated to the indebtedness and other liabilities of Abacus Life's subsidiaries.
• The indenture contains limited protection for the noteholders.
• There may not be an active and liquid trading market for the notes.

Risks

• The notes are unsecured and therefore effectively subordinated to any secured indebtedness.
• The notes are structurally subordinated to the indebtedness and other liabilities of Abacus Life's subsidiaries.
• The indenture contains limited protection for the noteholders.
• There may not be an active and liquid trading market for the notes.
• The company may choose to redeem the notes when prevailing interest rates are relatively low.
• An increase in interest rates could result in a decrease in the fair value of the notes.
• A downgrade, suspension, or withdrawal of any credit rating could cause the liquidity or market value of the notes to decline significantly.
• The company may not be able to repurchase the notes upon a Change of Control Repurchase Event.
• The company's valuation of life insurance policies is uncertain and any erroneous valuations could have a material adverse impact on the company's business.
• The company could fail to accurately forecast life expectancies.
• The company may experience increased competition from originating life insurance companies, life insurance brokers, and investment funds which could adversely affect the company's business.
• The company faces privacy and cyber security risks related to its maintenance of proprietary information, including information regarding life settlement policies and the related insureds, and any adverse impact related to such risks could have a material adverse impact on the company's business.
• The company is subject to U.S. privacy laws and regulations.
• The company's business may be subject to additional or different government regulation in the future, which could have a material adverse impact on the company's business.
• There is currently no direct legal authority regarding the proper federal tax treatment of life settlements and potential future rulings from the IRS may have significant tax consequences on the company.
• The failure of the company to accurately and timely track and pay premium payments on the life insurance policies it holds could result in the lapse of such policies which would have a material adverse impact on the company's business.
• The originating life insurance company may increase the cost of insurance premiums, which would adversely affect the company's returns.
• The company may not be able to liquidate its life insurance policies which could have a material adverse effect on the company's business.
• The company assumes the credit risk associated with life insurance companies and may not be able to realize the full value of insurance company payouts.
• The company's success is dependent upon the services of its management and employees.
• The company's intellectual property rights may not adequately protect the company's business.
• The company may become subject to costly intellectual property disputes.
• The ongoing COVID-19 pandemic, along with rising interest rates and inflation, may disrupt the ability of the company and its providers to originate life settlement policies which could have a material adverse impact on the company's financial position.
• We have identified material weaknesses in our internal control over financial reporting.
• Our ability to raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all.
• Our management has limited experience in operating a public company.

Future Outlook

The company intends to use the net proceeds from the offering to refinance other outstanding indebtedness and for general corporate purposes.

Industry Context

The life settlements industry is a growing market, offering policyholders an alternative to lapsing or surrendering their life insurance policies. This offering allows Abacus Life to strengthen its financial position and continue to capitalize on this market opportunity.

Stakeholder Impact

• Shareholders: Potential dilution of equity if warrants are exercised.
• Employees: No immediate impact.
• Customers: No immediate impact.
• Suppliers: No immediate impact.
• Creditors: The notes will rank equally with other senior unsecured debt.

Next Steps

• The underwriters expect to deliver the notes on or about February , 2024.
• The company intends to apply to list the notes on NASDAQ under the same symbol (ABLLL).
• The company intends to use the net proceeds to refinance other outstanding indebtedness and for general corporate purposes.

Key Dates

Keywords

senior notes, Abacus Life, debt offering, fixed rate, refinancing, life settlements, senior unsecured, notes, investment