SMG wants to convert debt to equity to prep for acquisition

Chicago, June 8 – SMG Industries Inc. is asking noteholders to convert their debt into equity to pave the way for an acquisition that will help the company upscale, according to an 8-K filing with the Securities and Exchange Commission.

The company’s current debt is around $45 million.

Board members have already committed to rolling $18.2 million of the $23.4 million outstanding.

The company has approached lenders and worked out term sheets for loan borrowings to support the acquisition, but the linchpin of the acquisition is getting debtholders to relinquish their debt and take equity before the transaction can be achieved.

The company has worked out a $25 million revolving credit facility term sheet with a national lender and a $32 million senior secured term loan with a national lender that would be interest only for the first six months.

On the revolver, $17 million would be immediately available and $12 million would be funding at closing.

Proceeds would be used to fund the transaction and refinance a significant portion of SMG’s existing debt.

Since the company is highly leveraged, it is limited in its ability to finance the transaction without the exchange.

The company is planning to acquire a diversified transportation business in the Northeastern United States, which would help it double its revenue.

The acquisition will cost $55.75 million, with $31 million in cash due at closing.

As part of the transaction, the seller would roll $19.25 million of equity into SMG and would receive a $3 million subordinated seller note.

SMG has agreed to pursue the acquisition of the seller’s warehousing business for $2.5 million in the future.

The company is seeking to close the transaction during the summer of 2023.

SMG is a transportation service company based in Houston.

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