DEF 14C: Finance of America Companies Inc. Stockholders Approve Issuance of Class A Common Stock for Exchangeable Notes

Finance of America Companies Inc. obtained stockholder approval for the issuance of up to 5,454,546 shares of Class A Common Stock upon the exercise of certain exchangeable notes to comply with NYSE regulations.

Summary

• Finance of America Companies Inc. (FOA) has received stockholder approval to issue up to 5,454,546 shares of its Class A Common Stock.
• This issuance is related to the exchange of certain exchangeable notes expected to be issued by Finance of America Funding LLC, a subsidiary of FOA.
• The approval was obtained via written consent from stockholders holding a majority of the voting power, satisfying Section 312.03 of the New York Stock Exchange Listed Company Manual.
• The definitive Information Statement was first mailed to stockholders of record as of June 24, 2024, on or about October 8, 2024.
• The approved action will become effective 20 calendar days after the mailing of the Information Statement.
• The Board retains discretion to consummate the transactions related to the Stock Settlement Issuance.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the company is securing necessary approvals and managing its debt, there is a dilution effect for existing shareholders and potential market price risk.

Positives

• The company has secured the necessary stockholder approval to proceed with the issuance of shares related to the exchangeable notes.
• High participation rate in the Exchange Offer and Consent Solicitation with holders representing at least 94% of the aggregate outstanding principal amount of the 2025 Unsecured Notes agreeing or communicating their intent to participate.

Negatives

• The issuance of shares will dilute the ownership of existing stockholders by approximately 19.1%.
• The market price of Class A Common Stock could decline due to the resale of significant amounts of shares pursuant to a registration statement or an exemption from registration.

Risks

• The completion of the transactions is subject to certain conditions and may not occur as contemplated or at all.
• The exchange of notes for shares could dilute existing stockholders' ownership.
• The market price of Class A Common Stock could be adversely affected by the resale of shares received upon exchange of the Exchangeable Notes.
• The company's ability to complete the transactions on commercially acceptable terms, on the timeline contemplated or at all, and the company's ability to realize the intended benefits of such transactions are uncertain.

Future Outlook

The company expects to execute a registration rights agreement to register the resale of Class A Common Stock received upon exchange of the Exchangeable Notes.

Management Comments

• The Board considered a number of factors in determining how to best structure the Transactions to optimally manage its liquidity, implement its business plans and generate value for its stockholders.
• The Board ultimately determined that the potential benefits of the Stock Settlement Issuance, in the context of the Transactions as a whole, outweighed any countervailing considerations.

Industry Context

This announcement reflects a company managing its debt obligations and liquidity through a combination of debt exchange and equity issuance, a common strategy in the current economic environment.

Comparison to Industry Standards

• Debt-for-equity swaps are a common restructuring tool, particularly for companies facing liquidity constraints.
• Comparable companies in the financial services sector, such as Mr. Cooper Group Inc. and PennyMac Financial Services, Inc., have also utilized similar strategies to manage their capital structure.
• The dilution effect of 19.1% is within the range of what is observed in similar transactions, although the specific impact depends on the company's valuation and market conditions.

Related Party Transactions

• Certain affiliates of Brian L. Libman, the Chairman of the Board, hold approximately 22.1% of the outstanding 2025 Unsecured Notes and intend to participate in the Transactions, potentially acquiring additional shares of Class A Common Stock.

Stakeholder Impact

• Existing stockholders will experience dilution of their ownership.
• Noteholders will have the opportunity to exchange their notes for new secured notes and potentially shares of Class A Common Stock.
• The company aims to improve its liquidity and financial flexibility.

Next Steps

• The company will proceed with the Exchange Offer and Consent Solicitation.
• The company will enter into a supplemental indenture to the Unsecured Notes Indenture.
• The company will execute a registration rights agreement to register the resale of shares of Class A Common Stock received upon exchange of the Exchangeable Notes.

Key Dates

Keywords

Class A Common Stock, Exchangeable Notes, Stock Settlement Issuance, NYSE, Stockholder Approval, Finance of America, Dilution, Exchange Offer, Consent Solicitation