Home Alts News RCS Capital and its Lenders Agree to Covenant Modifications, Stock Soars

RCS Capital and its Lenders Agree to Covenant Modifications, Stock Soars

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RCS Capital Corporation (NYSE: RCAP), the nation’s leading distributor of non-traded direct investment offerings, has reached important agreements with its first and second lien lenders to amend its leverage ratio covenants and other modifications. The companies battered share price, which had fallen nearly 85 percent from a high of $39.50 on April 1, 2014 to a low of $5.98 at June 29, 2015, soared more than 28 percent yesterday upon news of the agreement to close at $7.66.

“These credit agreement modifications provide RCS Capital with enhanced covenant flexibility, and will allow us to continue our commitment to invest in our businesses, execute our short-term and long-term business plans and to build on the success of our ongoing integration efforts,” said chief executive officer Michael Weil.

In addition, the firm has agreed to elect seven directors to its board, increase the number of Class A shares the company will issue, and made an amendment to its corporation equity plan.

Earlier this week, RCAP announced that its shareholders voted on a number of proposals including the election of seven new board members to hold office until the next annual meeting or until their respective successors have been elected and qualified, and an amendment to increase the number of shares of Class A common stock to 300 million.

Last October, RCS Capital’s stock price fell sharply following the disclosure of accounting irregularities by real-estate investment trust American Realty Capital Properties Inc., and the subsequent resignation of Nicholas Schorsh, the chairman of both companies.

Compounding the negative news, at the end of March, Moody’s Investor Services downgraded the firm to B3 with a negative outlook and mentioned the “adverse repercussions from the accounting and reporting issues at American Realty Capital Properties Inc. on the company’s wholesale distribution business.”

RCS Capital Corporation is a full-service investment firm with operating subsidiaries including retail advice services, wholesale distribution, investment banking, capital markets, investment research, investment management and crowdfunding.