Workhorse Group Inc., a technology company focused on providing sustainable and cost-effective drone-integrated electric vehicles (EVs) 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% 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 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 over $270 million in cash available.
“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,” says Duane Hughes, CEO of Workhorse. “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 U.S. These new vehicles within our portfolio of products, along with the expanding operations of our drone business, will help to further solidify our position and reach in the last-mile EV delivery segment.”
The exchange agreement provides that the holder of the existing notes will exchange $70 million principal amount of the notes, which is the entire outstanding principal amount of the notes, for 5,034,212 shares of the company’s common stock, subject to certain pre-closing adjustments. When the exchange is completed, the company will have no further obligations under the existing notes.
Workhorse expects that the sale of the notes and the exchange of the existing notes will be consummated on or about Oct. 14.
Goldman Sachs & Co. LLC served as exclusive financial advisor to Workhorse Group Inc. BTIG LLC acted as the financial advisor to the lenders.