Buddy Platform Limited (ASX: BUD) is an Australia based IT services management company which offers cloud-based technology solutions to provide simple, affordable and engaging solutions for customers to make their spaces smarter and their occupants more efficient. The company has three core products that help customers to fully leverage the technologies. Buddy Cloud enables global access to and storage of data from any environment from recreational vehicles, schools, commercial buildings to an entire city in support of smarter, healthier spaces. Buddy Ohm is a resource monitoring technology solution which helps to reduce risk and improve operations by providing real-time operational data and utility for building operations. Parse on Buddy is a mobile backend service which is capable of hosting the world’s most trafficked apps in a complete, scalable, and secure way.
On 18th March 2019, the company disseminated an update regarding its proposed acquisition of the entire issued share capital of Lifi Labs, Inc (LIFX). The company had already released all the details of the proposed acquisition in its announcement dated 6th February and 14th February 2019 and notice of a general meeting on 22 February 2019.
Under those acquisition announcements, it was stated that the company would enter into the debt financing facilities:
- So that a portion of cash consideration can be funded which is to be paid to Luminous Wide Limited under the merger agreement.
- To pay down and transition of an existing line of credit provided by Eastfield Lighting Co. Limited, a related body corporate of Luminous.
The company is continuously engaged with various third-party debt financiers to complete the LIFX Acquisition on or before 29 March 2019 along with previously announced placement to raise $18.1 million.
Buddy, Luminous (majority shareholder of LIFX) and Eastfield have entered into a term sheet, subject to entering into formal documentation, Luminous has agreed to defer payment of a portion of the cash consideration under the Merger Agreement and Eastfield has agreed to amend the agreed-form Loan Agreement on some of the following key terms
- Buddy will receive US$12.5 million in the form of a loan from Luminous, with the condition being, Buddy shall deduct the amount from its payment obligations under the Merger Agreement (Loan).
- The loan needs to be repaid with an interest rate of 10% per annum (capitalised quarterly), and in the case of any default, additional interest of 5% will apply on all overdue amounts.
- The "drop dead date” (the last date by which something must be done) for the repayment of the new loan agreement is 31 March 2020. The default interest provisions will apply on and from 31 December 2019 and Luminous may at any time on and from 31 December 2019 demand that the entire amount is repaid.
The company is also doing advanced discussions and negotiations with a third-party debt financier as a part of Tranche B Debt Financing. It will be undertaken to satisfy the Company's obligation to pay the accounts receivable amount under the loan agreement and for ongoing trade finance and working capital purposes.
The stock shot up massively by 26.2%, closing the trade at A$0.077 as on 18th March 2019 to the previous closing of A$0.061. The YTD return stands at negative 35.7% which would fall by more than half after today's rally.
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