180 Degree Capital Corp. Notes Opportunistic and Discounted Retirement of Preferred Stock and Repurchase of Notes by its Portfolio Company Synchronoss Technologies, Inc. (SNCR)

Rhea-AI Summary

180 Degree Capital Corp. (NASDAQ: TURN) announced that its portfolio company, Synchronoss Technologies, Inc. (SNCR), retired its Series B Preferred Stock and $19.7 million of its 8.375% Senior Notes due 2026 at discounted prices, funded by a new $75 million term loan with AS Birch Grove. These actions are projected to improve SNCR’s capital structure by $7.3 million and generate $10.6 million in pre-tax cost savings. This strategic move aligns with SNCR's cloud-only business transformation and strong financial performance, potentially enhancing free cash flow in 2024 and beyond. 180 Degree Capital acknowledges this as a testament to its constructive activism approach, highlighting the potential for significant value appreciation in SNCR.

Positive

• $7.3 million improvement to capital structure.
• $10.6 million in pre-tax cost savings.
• Reduction of outstanding debt at advantageous prices.
• Enhances SNCR's ability to generate free cash flow in 2024 and beyond.

Negative

• Funding through a new $75 million term loan which might increase future liabilities.

Insights

Financial Analyst

The recent moves by Synchronoss Technologies (SNCR) to retire part of their Series B Preferred Stock and $19.7 million worth of Senior Notes are financially prudent steps. By replacing these with a $75 million term loan, they effectively deleveraged their balance sheet and took advantage of lower interest rates. The resulting $7.3 million improvement in the capital structure and $10.6 million in pre-tax cost savings are significant wins for the company, enhancing their free cash flow.

From an investor's perspective, deleveraging generally signals financial health and stability. The reduced debt burden and lower interest obligations should enhance earnings per share (EPS) in the long term. These actions can also make the company more attractive to new investors, potentially boosting the stock price. However, it's important to monitor how the new loan terms affect their financial flexibility moving forward.

In the short term, this transaction is likely to be viewed positively by the market, reflected in potential stock price appreciation. Long-term benefits include improved financial stability and increased potential for growth and profitability.

Market Research Analyst

Synchronoss Technologies' strategic move to retire preferred stock and repurchase notes is a strong indicator of confidence in their cloud-only business transformation. The ability to attract a new lending partner such as AS Birch Grove signifies a robust belief in their market potential and operational performance.

For retail investors, this is an encouraging sign as it implies that the company is streamlining its operations and focusing on core competencies. The expected $10.6 million in pre-tax savings will likely be reinvested to further enhance their market positioning. The move also highlights a disciplined approach to capital allocation, which is important for long-term growth.

This transaction can serve as a catalyst for further positive changes, potentially driving up the stock's value as the company continues to optimize its financial structure and focus on profitable growth areas.

Credit Analyst

From a credit perspective, Synchronoss Technologies' decision to retire its higher-cost debt through a new term loan is a financially savvy move. The $75 million term loan from AS Birch Grove, replacing the higher interest-bearing Series B Preferred Stock and Senior Notes, should improve their debt-to-equity ratio. This is a key metric for evaluating a company's financial health, indicating a more stable balance sheet.

The reported $7.3 million improvement in capital structure and $10.6 million in pre-tax cost savings signify reduced financial strain and better cash flow management. This positions SNCR well to meet its debt obligations and invest in growth opportunities, which could lead to a better credit rating and lower future borrowing costs.

Investors should view this move positively as it reflects prudent financial management, enhancing the company's creditworthiness and potentially leading to better terms in future financial dealings.

MONTCLAIR, N.J., July 01, 2024 (GLOBE NEWSWIRE) -- 180 Degree Capital Corp. (NASDAQ: TURN) (“180 Degree Capital”) noted today the announcement by its portfolio company, Synchronoss Technologies, Inc. (SNCR), that SNCR has opportunistically retired at discounted prices its outstanding Series B Preferred Stock and $19.7 million of its outstanding 8.375% Senior Notes due 2026 (“Senior Notes”) funded by a new $75.0 million term loan with alternative credit manager, AS Birch Grove. SNCR reported that the combined transactions are expected to result in a $7.3 million improvement to its capital structure plus approximately $10.6 million in pre-tax cost savings. The announcement can be viewed at https://synchronosstechnologiesinc.gcs-web.com/news-releases/news-release-details/synchronoss-technologies-significantly-improves-capital.

“We would like to congratulate the team at SNCR for taking advantage of a timely opportunity to eliminate its outstanding preferred stock while also reducing its outstanding debt at advantageous prices,” said Kevin M. Rendino, Chief Executive Officer of 180 Degree Capital. “We have always lived by the adage that the best time to do something is when you do not have to do anything. SNCR’s transformation into a cloud-only business, and its strong financial performance, allowed the company to attract the interest of a new lending partner, AS Birch Grove, thus enabling SNCR to take advantage of this unique opportunity to both deleverage and materially reduce expenses. This transaction is additive to SNCR’s ability to generate free cash flow in 2024 and beyond. We are proud to have had the opportunity to work directly with SNCR’s management team and board of directors to help achieve this important milestone.”

“This transaction is a great example of what 180 Degree Capital means by constructive activism,” added Daniel B. Wolfe, President of 180 Degree Capital. “Since our original investment in 2021, we developed a strong relationship with the impressive management team of SNCR. We welcomed the opportunity to join SNCR’s Board of Directors in December 2023 when SNCR’s common stock was trading at $4.66 because we believed that our complementary skill sets could help unlock value for all stakeholders of SNCR. We also believed that there were multiple catalysts that could drive material appreciation in value should they occur. This transaction is just one of these catalysts, and we believe its successful completion sets SNCR up well for the potential to achieve additional ones in 2024 and beyond. We could not be more excited about the potential for SNCR to be a material driver of value appreciation for 180 Degree Capital in the future as well.”

About 180 Degree Capital Corp.

180 Degree Capital Corp. is a publicly traded registered closed-end fund focused on investing in and providing value-added assistance through constructive activism to what we believe are substantially undervalued small, publicly traded companies that have potential for significant turnarounds. Our goal is that the result of our constructive activism leads to a reversal in direction for the share price of these investee companies, i.e., a 180-degree turn. Detailed information about 180 and its holdings can be found on its website at www.180degreecapital.com.

Press Contact:
Daniel B. Wolfe
Robert E. Bigelow
180 Degree Capital Corp.
973-746-4500
ir@180degreecapital.com

Mo Shafroth
RF Binder
Morrison.shafroth@rfbinder.com

Forward-Looking Statements

This press release may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the Company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this press release. Please see the Company's securities filings filed with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the Company's business and other significant factors that could affect the Company's actual results. Except as otherwise required by Federal securities laws, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. The reference and link to the website www.180degreecapital.com and synchronosstechnologiesinc.gcs-web.com have been provided as a convenience, and the information contained on such websites are not incorporated by reference into this press release. 180 is not responsible for the contents of third-party websites.

FAQ

What recent financial move did Synchronoss Technologies, Inc. (SNCR) make?

SNCR retired its Series B Preferred Stock and $19.7 million of its 8.375% Senior Notes due 2026 at discounted prices.

How is 180 Degree Capital Corp. (TURN) involved with SNCR's recent financial actions?

180 Degree Capital, having a significant investment in SNCR, supported its actions to retire preferred stock and senior notes, aligning with its constructive activism strategy.

What is the expected financial impact of SNCR's debt retirement?

The transactions are expected to improve SNCR's capital structure by $7.3 million and generate $10.6 million in pre-tax cost savings.

What role did AS Birch Grove play in SNCR's recent financial strategy?

AS Birch Grove provided a $75 million term loan that funded SNCR's retirement of Series B Preferred Stock and senior notes.

How might SNCR's recent financial moves affect its future performance?

The actions are expected to enhance SNCR's ability to generate free cash flow in 2024 and beyond, contributing to potential value appreciation.