STG Group Holdings shares go to SOSi in $83 million foreclosure sale

By Caroline Salls

Pittsburgh, April 12 – Representatives of STG Group, Inc. wholly owned subsidiary STG Group Holdings, Inc. informed the company that a collateral sub-agent under a Nov. 23, 2015 credit agreement has sold all of the stock of STG Group Holdings to SOS International Ltd. (SOSi) for roughly $83 million under a foreclosure sale, according to an 8-K filed with the Securities and Exchange Commission.

STG said the proceeds of the transaction were used to pay transaction expenses and to repay substantially all of the $80.1 million of outstanding principal, interest and fees owed to the lenders under the credit agreement.

The company said it is unclear at this time whether there will be any remaining net proceeds available to the company, but even if there were it is unlikely that there would be any proceeds available for distribution to the shareholders after payment to creditors.

STG Group Holdings said it engaged Raymond James & Associates, Inc. in December to serve as its financial adviser to explore strategic options, including a possible financing, restructuring or business combination transaction.

By the end of January, the company said there were six indications of interest, excluding a previous indication of interest from SOSi, with valuations ranging from $40 million to $85 million, with an average midpoint of $66.9 million.

Four of those six bidders were asked to submit non-binding letters of intent or verbally updated valuation ranges. At this time, STG said SOSi’s offer was at the high end of the valuation range, and the level of due diligence performed by SOSi and its advisers was substantially higher than the level of due diligence performed by the other bidders.

The transaction based on SOSi’s final $83 million offer was approved by STG Group Holdings’ board on April 9, and a stock purchase agreement was executed on April 11.

As previously reported, STG Group received a formal notice of default on Nov. 13 from administrative agent MC Admin Co LLC with respect to its credit agreement dated Nov. 23, 2015.

The company failed to be in compliance with the financial covenants required by the credit agreement as of June 30, 2017. Specifically, those financial covenants relate to the fixed-charge coverage ratio, the consolidated EBITDA and senior secured leverage ratio.

MC Admin elected to exercise its rights to vote the shares of wholly owned subsidiary STG Group Holdings, Inc. to remove its existing directors and to elect Jarlath A. Johnson and Robert Warshauer as the new directors of STG Group Holdings.

Reston, Va.-based STG Group is a provider of cyber, software and intelligence solutions to the U.S. government.

© 2015 Prospect News.
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