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Complete Solaria Raises $10 Million in Convertible Debenture to Pay Off Carlyle Debt

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Complete Solaria (Nasdaq: CSLR) has raised $10 million through a private placement of Convertible Senior Notes to pay off debt owed to Carlyle. The notes, issued to an entity affiliated with CEO Thurman J. Rodgers, carry a 12% interest rate, mature in five years, and are convertible into CSLR common stock at $2.00 per share, a 33% premium over the current stock price of $1.50. This transaction is expected to improve the company's cash flow significantly by reducing annual debt service payments from $4.4 million to $1.2 million.

Positive
  • Raised $10 million in Convertible Senior Notes to pay off Carlyle debt.
  • Convertible notes carry a 12% interest rate and mature in five years.
  • Conversion price set at $2.00 per share, a 33% premium over current price.
  • Reduction in annual debt service payments from $4.4 million to $1.2 million.
  • Notes issued to an entity affiliated with CEO Thurman J. Rodgers, signaling confidence in the company's future.
Negative
  • Current revenue has fallen sharply from $20.7 million in Q4’23 to an estimated $6 million this quarter.
  • High interest rate of 12% on the new notes.
  • Company reliant on raising additional $10 million under similar terms to meet financial obligations.
  • The notes are general senior unsecured obligations, adding financial risk.

Complete Solaria Inc.'s latest financial maneuver is aimed at improving its financial health. The company has issued $10 million in Convertible Senior Notes with a 12% coupon rate. This move allows the company to pay off a significant portion of its high-interest debt, reducing its annual interest burden from $4.4 million to $1.2 million, thus improving cash flow and profitability. The conversion price of $2.00 per share offers a 33% premium over the current stock price, presenting potential upside if the company's stock performs well in the future.

For retail investors, this is a mixed bag. While the reduction in debt and interest expense is a clear benefit, the 12% interest rate on the new debt is still relatively high. The company's recent revenue decline — from $20.7 million in Q4'23 to an estimated $6 million this quarter — is concerning, although management cites a significant backlog of $18.6 million.

Key Takeaway: The deal is a step in the right direction to stabilize the company's finances and could lead to improved profitability in the long term, but investors should be cautious of the high interest rate and declining revenues.

Rating: 1

The issuance of Convertible Senior Notes by Complete Solaria is a strategic move to manage its financial commitments better. However, the solar industry is highly competitive and the company’s declining revenue amidst a substantial backlog raises questions about its operational efficiency and market position. The company's ability to convert their backlog into actual revenue will be critical in reversing the current downtrend.

Investors should also consider the potential dilution of shares due to the conversion feature of the notes. While the conversion price is set at $2.00, which is a 33% premium, it could dilute existing shareholders if the share price appreciates beyond this level.

Key Takeaway: The success of this financial move depends heavily on the company's capacity to leverage its backlog and improve operational efficiency. Potential dilution is a risk factor to watch.

Rating: 0

From a legal perspective, the issuance of Convertible Senior Notes is structured under Section 4(a)(2) of the Securities Act of 1933, meaning it is a private placement exempt from registration with the SEC. This allows the company to quickly access capital without the regulatory burden of a public offering but limits the notes to accredited investors, which might restrict liquidity.

The notes include standard protections under Rule 144A, offering some security to investors. However, the terms like the 12% coupon rate and soft calls are relatively high-risk features, reflecting the company's current financial distress.

Key Takeaway: The legal structure provides the company with expedient access to capital but involves high-risk terms that reflect the company's distressed financial situation.

Rating: 0

LEHI, Utah, June 17, 2024 (GLOBE NEWSWIRE) -- Complete Solaria, Inc. (“Complete Solaria” or the “Company”) (Nasdaq: CSLR), a leading solar technology, services, and installation company, today announced a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended, of $10 million Convertible Senior Notes to an entity affiliated with Thurman J. Rodgers, Chief Executive Officer of CSLR (the "TJR Notes").

Cantor Fitzgerald & Co. served as Sole Financial Advisor to Complete Solaria and Cooley LLP acted as legal counsel to the Company in connection with the transaction, whose terms are summarized below: 

Standard Rule 144A terms. The notes will be convertible at the option of the holder, into common stock of CSLR and will contain all general customary investor protections found within Rule 144A convertible securities.

12% coupon, 5-year term. The notes will be general senior unsecured obligations of the Company and will accrue an interest payable semi-annual in arrears at a rate of 12% per year. The notes will mature July 1, 2029 unless earlier converted, redeemed or repurchased.

$2.00 conversion price, an approximate 33% conversion premium. The initial conversion rate is 500 shares of CSLR common stock per $1,000 principal amount of Notes, equivalent to an initial conversion price of $2.00 per share, which represents a conversion premium of approximately 33% to the agreed upon reference price of CSLR's common stock on the Nasdaq Global Market, currently about $1.50 per share.

Soft calls: $3.00 July 2027; $2.60 July 2028. The Company may not redeem the notes prior to July 5th, 2026, thereafter until July 1, 2027 subject to the share price trading at $3.00 per share for 20 out of 30 consecutive trading days. Then from July 1, 2028 until maturity, subject to the share price trading at $2.60 per share for 20 out of 30 consecutive trading days.

Additional participation. Thurman J. Rodgers and the Company have agreed to a multilateral 90-day right, to offer up to $10 million of additional notes to any interested parties on identical terms and conditions as the TJR Notes.

T.J. Rodgers, Complete Solaria’s CEO, said, “We have an executed contract which specifies that after we pay our private equity debt provider, Carlyle, $10 million in cash (and meet other non-financial conditions) our obligation is terminated. For the last six months, that unfulfilled obligation has prevented the Company from raising working capital for our business, even just to buy solar panels to install, because our vendors currently sell to us on a cash-only basis. That working capital shortage dropped our revenue from $20.7 million in Q4’23 to $10.0 million in Q1’24 to an estimated $6 million this quarter – despite our current $18.6 million backlog (510 jobs).”

Rodgers continued, “The financials for this relatively standard five-year convertible debenture are for a 12% coupon on the debt and an approximate conversion premium on the reference $1.50 stock market price, leading to a $2.00 strike price on the options underlying the bonds. In non-banker language, I paid $10 million for 5 million Complete Solaria five-year options with a $2.00 strike price. I am confident in this investment because it will be “in the money” if our share price goes over $2.00 at any time in the next five years. And, it’s a win-win deal for the Company, which will replace its $35.8 million of 20% debt riddled with restrictive covenants with $10 million of 12% debt with no covenants.”

Brian Wuebbels, Complete Solaria’s COO and Acting CFO, said, “We have been paying $4.4 million per year to service our debt – and this deal, combined with the upcoming elimination of our $31.8 million private debt with Kline-Hill – will cut that $4.4 million payment to $1.2 million. That’s $3.2 million per year more to the bottom line.”

About Complete Solaria
Complete Solaria is a solar company with unique technology and end-to-end customer offering, which includes financing, project fulfilment and customer service. Complete Solaria’s digital platform together with premium solar products enable one-stop service for clean energy needs for customers wishing to make the transition to a more energy-efficient lifestyle. For more information visit www.completesolaria.com and follow us on LinkedIn.

Forward Looking Statements 
This press release may contain certain forward-looking statements within the meaning of the federal securities laws with respect to the referenced transactions. These forward-looking statements generally are identified by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would,” and similar expressions, but the absence of these words does not mean that a statement is not a forward-looking statement. Forward-looking statements are forecasts, predictions, projections and other statements about future events that are based on current expectations, hopes, beliefs, intentions, strategies and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this press release the price of Complete Solaria’s securities may be volatile due to a variety of factors, including changes in the applicable competitive or regulatory landscapes, variations in operating performance across competitors, changes in laws and regulations affecting Complete Solaria’s business, and changes in the combined capital structure; the ability to implement business plans, forecasts, and the evolution of the markets in which Complete Solaria will compete.

Readers should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024. Such filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Complete Solaria assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

For investor inquiries, please contact:
Complete Solaria, Inc.
Marc P. Griffin
Phone: +1 (646) 277-1290
CompleteSolariaIR@icrinc.com

Source: Complete Solaria, Inc.


FAQ

What is the purpose of Complete Solaria's $10 million Convertible Senior Notes issue?

The $10 million raised through Convertible Senior Notes will be used to pay off debt owed to Carlyle.

What are the terms of the Convertible Senior Notes issued by Complete Solaria?

The notes have a 12% interest rate, mature in five years, and are convertible into CSLR common stock at $2.00 per share, representing a 33% premium over the current price.

How will Complete Solaria’s new debt structure impact its financials?

The new debt structure will reduce annual debt service payments from $4.4 million to $1.2 million, significantly improving cash flow.

Who is purchasing the Convertible Senior Notes issued by Complete Solaria?

The notes are being purchased by an entity affiliated with CEO Thurman J. Rodgers.

What impact will the Convertible Senior Notes have on Complete Solaria's stock price?

The notes are convertible at $2.00 per share, a 33% premium over the current price, which could be beneficial if the stock price increases.

What is the conversion rate of the new notes issued by Complete Solaria?

The initial conversion rate is 500 shares of CSLR common stock per $1,000 principal amount of notes.

How does Complete Solaria plan to mitigate its working capital shortage?

The capital raised through the note issuance will be used to pay off debt, improving the company's ability to raise working capital and purchase necessary supplies.

What is the revenue trend for Complete Solaria in recent quarters?

Revenue decreased from $20.7 million in Q4’23 to $10 million in Q1’24, and is estimated to be $6 million for the current quarter.

Complete Solaria, Inc.

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