The business entered into the deal with the holder of the debt, Alto Opportunity Master Fund, which agreed to exchange the remaining balance of the company’s liabilities into new unsecured stock after EEG’s next capital raise.
Once completed, combined with a number of prior transactions, the agreement will reduce the company’s debt by approximately $42m, resulting in a largely debt free balance sheet. EEG said that it that the move represents “material progress” towards addressing the company’s remaining Nasdaq listing deficiencies.
EEG exchanges debt
The business narrowly escaped de-listing towards the end of 2022, and – after the exit of the CEO – put in place a plan to return towards listing suitability. The closing of the deal will see EEG able to demonstrate that it is in compliance with the Nasdaq requirement to have a minimum of $2.5m in stockholder equity spelled out in the exchange’s listing rules.
“We appreciate the tremendous support of our senior lender, who has agreed to exchange their senior convertible note to preferred equity, which we believe illustrates their confidence in the outlook for the business, while improving our balance sheet, enhancing cash flow, and providing us greater financial flexibility to execute our new growth strategy,” said EEG CEO Alex Igelman.
Alto director Waqas Khatri himself expressed his belief in the company’s prospects.
“We are excited to support this debt reduction transaction, which not only demonstrates our confidence in the company’s leadership, direction, and fiscal discipline but also reflects our belief in the new management team’s cohesive vision for the Company’s technology assets,” he said.
“We applaud the company’s more operationally efficient business model and the team’s focus on creating long-term value and profitability. This transaction is a testament of our commitment to the Company, and we are honored to be a part of its success story.”
EEG strategic reorientation
This week, Igelman announced a series of initiatives to divest itself of a number of revenue streams in order to focus on a more streamlined set of B2C operations. The executive re-emphasised the content of that letter, highlighting the proposed savings as placing the business on a sure financial footing.
“I recently outlined a series of initiatives, well underway, to focus our efforts on key business lines within the igaming, esports and e-simulator markets, while simultaneously streamlining operations,” he said.
“Through the actions already in place, we expect to reduce our operating expenses by over $4.0 million on an annualised basis and have identified further opportunities to reduce costs going forward.
“Including this latest note exchange, we have also reduced debt and other liabilities by over $42 million, year to date. As a result, I believe the company’s financial and operational outlook is back on track to capitalize on the esports opportunities ahead of us.”
Original article: https://igamingbusiness.com/finance/eeg-enters-transaction-to-eliminate-majority-of-debt/
