Great work from Johnny C over on RAWK.
It seems that Hicks SPAC cannot be used for Liverpool based activities.
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.I believe that there is a decent chance that Hicks will raise $150M very soon. That said, as of right now, he will NOT be able to use any of that money to fund anything Liverpool-related.
To my knowledge no one has picked up on these recent changes yet. The press certainly hasn't. People are certainly aware that Hicks has had a SPAC offering in the works for months now; however, I am not sure if they have noticed how things have drastically changed.
Please bear with me as I walk through my thinking and rationale with all this...
Note: The most important charts are the last two. Simply compare them.
(and I apologize in advance for not having permission yet to post images, this is my 1st post, because of this any links & charts I have put in blue)
For me the issue was never RBS or Wachovia refinancing the existing debt, because those moves are only very short-term band-aids.
The issue all along for me was (1) would RBS's distressed debt portfolio managers show enough fortitude to take "ownership" of Liverpool FC and (2) more importantly would Hicks be able to raise a big chunk of money via the public markets with his SPAC which he could turn around and use to either buy his way out of trouble @ Liverpool or cause even more trouble.
Probably the best financial (and certainly the most profitable) thing that Hicks was able to accomplish over the past few years was the IPO of his Special Purpose Acquisition Company (SPAC) in 2007. Well, after 3 months of trying to get his 2nd SPAC IPO, I believe it's going to be very possible that he gets it done over the coming weeks.
So what is a SPAC ? A Special Purpose Acquisition Company. It is essentially a company that has no operations. It has no products and no services. However, what it does have is a group of people who have some sort of experiences "building" businesses. These people form a SPAC and IPO it. In doing so they publicly raise funds to go out and acquire a company with over a set amount of time.
Hicks' 1st SPAC, Hicks Acquisition Co I, was a mixed bag for those people who bought it. With the $490M in proceeds from the IPO Hicks ended up buying an oil and gas producer out in Utah. He did this of course only after he tried to unsuccessfully lever-up the $490M to acquire a $3.2 Billion plastics packaging company from Blackstone. Hicks profited much much more than the people who bought his deal @ $10. As you can see in this chart below it has basically traded inline with the overall US market.
Recently Hicks has been trying to IPO his 2nd SPAC, called Hicks Acquisition Co II since this past June. He couldn't do it though. The IPO market for SPACs completely dried up, and rightly so.
The Monday (9/27) that Hicks was here in NYC and was spotted on the street, he wasn't in meetings related to financing from Blackstone et. al. Instead he was here because he had "teach-ins" with the various Institutional sales forces who were supposed to find clients to buy this recently planned IPO. He was also likely meeting with some bankers from Citi & DB to make the changes that I am about to describe to the IPO. That is why he was @ the DB building all afternoon.
Most importantly he was adding another name to help him out in selling this SPAC to the public. That Monday Hicks filed new details of the deal with the Securities Exchange Commission (SEC). The big change that he made was adding the company Ladenburg Thalmann & Co to the other two banks (Citi & DB) who were going to try to sell this deal. At the end of the day Citi & DB really don't have a great Rolodex from which they can contact clients to sell these type of SPAC deals. Instead, Citi & DB are interested in doing the deal because they want to sell one of their banking clients to the executive team who is running the SPAC.
Anyway... Monday (9/27) rolls around and Hicks gets feedback from Citi & DB that they just don't have the client interest to do the deal anytime soon. So Hicks thinks to himself... "Who out there knows a list of clients that would be willing to take on a SPAC IPO in this market where most Institutional firms are cutting their risk profiles?" So he says, "Who was able to do the last SPAC IPO?" Well...It turns out that it's a company called 57th Street General Acquisition Corp (ticker: SQTCU). They did the very last SPAC IPO back in May of this year. Since then there hasn't been another one. So Hicks calls up the head guy @ 57th Street General Acquisition Corp. This guy's name is Mark D. Klein and he says to Hicks, "Sure for a fee I'll give you the list of the guys who bought my SPAC IPO." This guy Mark D. Klein is the ex-CEO of this chop-shop investment bank called Ladenburg Thalmann & Co. Furthermore, he say that in addition to the fee that he is personally being paid that his old firm, Ladenburg Thalmann, should have its name on the IPO prospectus, so that Landenburg's bankers can claim a "win" this year. Why do I suspect this to be true ? Because of the following in the prospectus for Hicks' deal :
Under the section "Use of Proceeds"
And despite being on the cover as a banker in the deal, Landenburg Thalmann & Co isn't listed as one of the actual Underwriters for the deal and thus won't be seeing any banking fees.
These two things together aren't typical at all. Because of this I am led to believe that Mark D. Klein simply gave Hicks his client list from his successful IPO in May, and the company that Klein use to run, Landenburg Thalmann & Co, were thrown a banking publicity bone by having their name next to Citi & DB on the cover of the prospectus.
So Hicks' bankers then have to resubmit documents to the SEC to recognize these changes. They do so that Monday (9/27) using the same terms of the deal : 20M shares being sold to the public @ $10 apiece ($200M total value). See
Here .
So last week rolls around and this SPAC IPO is supposed to price and go out to the public. They try on Monday and Tuesday to get the deal out, but no dice. By Wednesday night word came back that the deal wasn't going to get done even with this new client list. Citi & DB came back to Hicks either Wednesday night or Thursday and essentially said that the valuation of the deal ($10) was fine, but that they simply didn't have enough clients who were willing to take all 20M shares.
Fast forward to this past Friday (10/8). Hicks is in desperation. News of the John Henry's NESV bid has already come through. Hicks bites the bullet and calls up Citi & DB and says lets cut the deal to 15M shares ($150M total value). And they do it. See
Here .
I believe that Hicks' $150M SPAC IPO deal could price this week or next and that this guy could see a nice chunk of change in his pocket. I'm not saying it will 100% happen, but Hicks has scrambled a lot in the past three weeks to see that there is a good chance that it does get done.
If you want to see some further filings just go
Here on the SEC website and search Hicks.
Keep in mind that I am not first-hand privy to any of this. I don't invest in SPACs and I was not involved in these meetings nor have I communicated with anyone who was. This is all speculation on my part. However, being an Institutional investor who has been around the block and walking through the timing and these events, all of this makes perfect sense.
One question I have is "Who are the investors on this client list that I believe Mark Klein sold to Hicks to fund his SPAC?" For that we have to check out the people who registered as owners of Klein's 57th Street General Acquisition Corp. That SEC website is as good a place as any to find that info.
Here are some of the names that you can come up with by doing a quick search of the Institutional investors who took on Klein's IPO (hint: they are not necessarily the cream of the crop when it comes to Wall Street) :
* Pine River Capital Management L.P (
http://www.pinerivercapital.com/) - there a quite a few marketing names on the website
* Bulldog Investors (
http://www.bulldoginvestors.com/) - Phillip Goldstein & Andrew Dakos
* Archer Capital Management L.P (
http://www.archercm.com/) - Eric J. Edidin
* Canton Holdings LLC - Joshua A. Lobel
* Encore Atlantic Fund LLC ( ? ) - Richard J. Rosenstock
If you are curious what their holdings are just simply search that SEC website for their funds/names.
Anyway the BIG question is "Can Hicks use the proceeds of any SPAC IPO to bail him out of his debts @ Liverpool ?"
I can happily tell you that the answer is NO, he cannot.
However, this is a vastly different answer than it was as of last Thursday (10/7).
Here's what the IPO prospectus said (page 1 Summary) as recently as last week :
The
highlighted text basically says that Hicks can invest this money in ANY business or partnership that he wants to.....Liverpool included. That was as recently as this past Thursday.
So remember that this past Friday (10/8), Citi & DB changed the deal to 15M shares... Well I wanted to see what else they changed. It turns out that there was a BIG CHANGE.
After this past Friday's changes, here is how the new prospectus reads :
Compare the
highlighted text. Notice the difference...?
This is a MAJOR blow to Hicks...! The banks basically came back to him last week and said that not only couldn't they place anything close to the 20M shares of his IPO, but that they were also recieving concerned questions from Institutional investors (even the 2nd & 3rd-rate ones) about whether or not Hicks was going to use the IPO proceeds for anything Liverpool-related, and that if he was that they wanted no part of the deal. Hicks not only capitulated on the size of the offering (20M down to 15M shares), but he also had to concede and put in writing that he would not use the proceeds for anything Liverpool-related.
Anyway... I just wanted to highlight this. I know that some of you are going to lose your heads when you see that he raised $150M, but rest assured that (barring him changing the prospectus) in NO WAY can he use it related to Liverpool FC or his related debts.
This battle is FAR from over, but at least there is one less bullet in his rusty Colt 45.
