Workhorse Group Inc., a provider of cost-effective drone-integrated electric vehicles to the last-mile delivery sector, has entered into a note purchase agreement (NPA) under which it will sell $200 million aggregate principal amount of its 4.0% Senior Secured Convertible Notes due 2024 to two institutional lenders.
The proceeds of the offering before expenses are expected to be approximately $194.5 million and will be used to increase and accelerate production volume, advance new products to market, replace previous higher cost financings, and support current working capital and other general corporate purposes.
In addition, Workhorse has entered into an exchange agreement with the holder of its existing 4.5% convertible notes to exchange the full $70.0 million outstanding principal amount of those notes for shares of the company’s common stock. After the closing and release of the proceeds, the company will have more than $270 million in cash available.
The Notes will initially be convertible into common stock by the holders at $36.14 per share, which is a premium of 35% over the closing price of the common stock on Friday, 9 October, subject to certain potential closing adjustments based on the average trading price for the two trading days prior to closing, and further subject to customary anti-dilution adjustments and adjustments for certain corporate events.
The Note will mature in four years and will bear interest at a rate of 4.0% per year paid quarterly starting on 15 January 2021, which rate may be reduced to 2.75% if the Company meets certain conditions. Interest can be paid at the company’s option either in cash or, subject to certain conditions, stock.
With this financing in place, we can more quickly advance our production efforts heading into 2021 by increasing our supply chain component volumes, hiring more manufacturing employees and automating certain sub-assembly processes. We can also accelerate our production timeline for new, high-demand customer products, including a refrigeration truck for grocery applications as well as a purpose-built class 2 delivery van, allowing us to address one of the fastest growing vehicle markets in the US.—Workhorse CEO Duane Hughes