DEFA14A: Beneficient Inks $62 Million Liquidity Deal with ff Venture Capital Funds

Beneficient will finance liquidity transactions for three funds managed by ff Venture Capital, potentially increasing its loan portfolio collateral by up to $121.5 million.

Summary

• Beneficient has entered into Alternative Asset Purchase Agreements with ff Silver Venture Capital Fund, ff Blue Private Equity Fund, and ff Rose Venture Capital Fund to engage in liquidity financing transactions.
• Beneficient's customized trust vehicles will acquire alternative assets held by each Seller, and in exchange, the respective Seller will receive shares of Beneficient's Series B Resettable Convertible Preferred Stock.
• The company expects to issue up to $62 million in stated value of Series B Preferred Stock in the aggregate, subject to participation levels by limited partners of the Sellers.
• The Series B Preferred Stock is convertible into Class A Common Stock initially at a conversion price of $0.1313 per share, subject to reset monthly.
• Closing of the Transactions is subject to shareholder approval and approval for an increase in the number of authorized shares of Class A Common Stock.
• Sellers will be entitled to receive monthly Earnout Payments based on the cash available for distribution from the acquired alternative assets in excess of a designated return to the Company.
• If the Class A Common Stock ceases to be listed on an Approved Exchange, holders of the Series B Preferred Stock have the right to cause the Buyers to repurchase the shares of Series B Preferred Stock out of available cash from the Purchased Alternative Assets.
• The transactions are expected to close in the third calendar quarter of 2024.

Sentiment

Score: 7

Explanation: The document presents a positive outlook with the new liquidity transaction. However, the reliance on shareholder approval and the potential for limited partner participation to affect the final outcome temper the overall sentiment.

Positives

• The transactions provide a new means of liquidity for valuable alternative assets.
• Beneficient's GP Solutions enable general partners to retain a portion of the upside of the alternative assets and underlying investments for their limited partners.
• Financing can be provided directly from Beneficient's own balance sheet, potentially resulting in more flexible and creative solutions for general partners and their limited partners.
• The transactions could increase the collateral for Beneficient's loan portfolio by up to $121.5 million of interests in alternative assets.

Negatives

• The closing of the transactions is subject to shareholder approval, which introduces uncertainty.
• The value of the Series B Preferred Stock is subject to the performance of the acquired alternative assets.
• The conversion price of the Series B Preferred Stock is subject to reset, which could dilute existing shareholders.
• If the Class A Common Stock ceases to be listed, the company may be required to repurchase the Series B Preferred Stock.

Risks

• The transactions are subject to shareholder approval, which may not be obtained.
• Limited partners may choose not to participate in the transactions, reducing the amount of Series B Preferred Stock issued and the increase in collateral for Beneficient's loan portfolio.
• The Class A Common Stock may cease to be listed on an Approved Exchange, requiring the company to repurchase the Series B Preferred Stock.
• The value of the acquired alternative assets may decline, reducing the amount of cash available for distribution and the Earnout Payments to the Sellers.

Future Outlook

The company anticipates closing the transactions in the third calendar quarter of 2024, subject to shareholder approval and other closing conditions. The transactions are expected to provide a new means of liquidity for valuable alternative assets and enable general partners to retain a portion of the upside of the alternative assets and underlying investments for their limited partners.

Management Comments

• Brad Heppner, Chief Executive Officer and founder of Beneficient, stated that Ben strives to provide flexible, customized liquidity and capital solutions for general partners managing alternative assets.
• John Frankel, Founding Partner of ff Venture Capital, stated that they are pleased to be able to offer this new and creative liquidity solution to their limited partners.

Industry Context

This announcement reflects a trend in the alternative asset market towards providing liquidity solutions for limited partners and general partners. Beneficient is positioning itself as a technology-enabled platform focused on providing these solutions.

Comparison to Industry Standards

• Comparable companies in the alternative asset liquidity space include firms like Lexington Partners, HarbourVest Partners, and Coller Capital, which specialize in secondary market transactions for private equity and other alternative investments.
• These firms typically focus on larger transactions and institutional investors, while Beneficient is targeting mid-to-high net worth individuals and small-to-midsized institutions.
• The use of a technology-enabled platform and a TEFFI charter differentiates Beneficient from traditional secondary market players.

Stakeholder Impact

• Shareholders: Potential dilution from the conversion of Series B Preferred Stock.
• Limited Partners: Opportunity to gain liquidity from their alternative asset investments.
• General Partners: Ability to retain a portion of the upside of the alternative assets and underlying investments.
• Beneficient: Potential increase in the collateral for its loan portfolio.

Next Steps

• Obtain shareholder approval for the transactions.
• Satisfy other closing conditions.
• Close the transactions, expected in the third calendar quarter of 2024.
• Continue to manage the alternative assets acquired by the newly created special purpose continuation vehicles.

Key Dates

Keywords

Beneficient, liquidity, alternative assets, ff Venture Capital, Series B Preferred Stock, financing, earnout, shareholder approval, conversion price, loan portfolio