ECN Capital and Skyline Champion Corporation closed the previously announced transaction pursuant to which Champion Canada Holdings, a wholly-owned subsidiary of Skyline Champion, has made an approximately C$185 million ($138 million) equity investment in ECN Capital on a private placement basis in exchange for 33.55 million common shares of ECN Capital and 27.45 million mandatory convertible preferred shares, Series E, of ECN Capital in each case at a price per share equal to C$3.04 ($2.25). Following closing of the private placement, Skyline Champion owns an approximately 19.9% indirect equity interest in ECN Capital (assuming the conversion of all convertible preferred shares). The net proceeds from the private placement will be used to reduce indebtedness and for general corporate purposes.
The convertible preferred shares are initially convertible on a one-for-one basis into an aggregate of 27.45 million common shares, subject to customary anti-dilution adjustments. The convertible preferred shares will receive cumulative cash dividends at a rate of 4% per annum, payable semi-annually, on the liquidation preference, which is initially equal to the Share issue price (subject to customary anti-dilution adjustments).
Upon closing of the private placement, Tawn Kelley, a member of the board of directors of Skyline Champion, was appointed to the board of directors and credit and risk committee of ECN Capital. In addition, as previously disclosed, ECN Capital and Skyline Champion have also entered into an investor rights agreement providing for, among other things, customary piggy-back registration rights, preemptive rights, standstill and voting support obligations and certain other rights and restrictions, including a right to match in connection with unsolicited offers to acquire ECN Capital or Triad Financial Services, a wholly-owned subsidiary of ECN Capital.
In connection with the private placement, ECN Capital and Skyline Champion have formed Champion Financing, a captive finance company that is 51% owned by an affiliate of Skyline Champion and 49% owned by Triad. Champion Financing will provide a tailored retail finance loan program for customers and a new branded floorplan offering for Skyline Champion, its affiliates and their independent retailers in the manufactured home finance space and will operate with services provided by Triad.
Immediately prior to the private placement, Skyline Champion did not beneficially own, or exercise control or direction over, any securities of ECN Capital. Immediately following the private placement, Skyline Champion beneficially owns 33.55 million common shares, representing 11.98% of the issued and outstanding common shares, and 27.45 million convertible preferred shares, representing 100% of the issued and outstanding convertible preferred shares. If Skyline Champion were to convert all of the convertible preferred shares into common shares in accordance with their terms immediately after the closing of the private placement, Skyline Champion would beneficially own 61 million common shares, representing 19.84% of the issued and outstanding common shares of ECN Capital.
In the aggregate, the purchased shares beneficially owned by Skyline Champion immediately following the closing of the private placement represent 19.84% of the outstanding voting shares of ECN Capital. Immediately following the closing of the private placement, Skyline Champion beneficially owns 19.84% of the common shares on a partially diluted basis, assuming the conversion of all the convertible preferred shares.
Skyline Champion is acquiring the common shares and convertible preferred shares for investment purposes and will continue to monitor the business, prospects, financial condition and potential capital requirements of ECN Capital. Depending on its evaluation of these and other factors, and subject to its obligations and covenants under the investor rights agreement, Skyline Champion may from time to time in the future decrease or increase its direct or indirect ownership, control or direction over securities of ECN Capital through market transactions, private agreements, subscriptions from treasury or otherwise, or may in the future develop plans or intentions relating to ECN Capital.
