REE's restructuring would cancel all existing shares and take the by-wire maker private
The Israeli developer of x-by-wire vehicle platforms disclosed an equity commitment letter and a court timetable under Israeli insolvency law, under which existing shareholders would be wiped out and the company would leave the public market.
REE Automotive disclosed on October 23 that it had entered an equity commitment letter in connection with a proposed debt restructuring under Israel’s Insolvency and Economic Rehabilitation Law, 5778-2018.
The Form 6-K said the company entered the letter on October 19 with Kukac LLC and Elljay Limited, which agreed, subject to conditions, to invest an aggregate of four million dollars, in separate commitments of two million dollars each, as working capital. The filing said that investment will not be available for distributions to creditors or for the costs of the insolvency proceedings.
Up to three million dollars of available cash and anticipated future revenues would be allocated to a fund for creditor distributions and proceeding costs. Eligible creditors would also be entitled to contingent consideration of up to a further three million dollars on a qualifying exit transaction on or before September 30, 2029. The plan contemplates converting certain debt into equity and cancelling all existing shares and other equity rights without consideration to existing holders. Following completion, and before a new employee equity incentive plan is implemented, the investors would hold 60 per cent of the company, chief executive Daniel Barel 19 per cent, chief technology officer Ahishay Sardes 10 per cent and convertible-note holders 11 per cent. The commitment letter provides for that plan to be adopted after closing. REE said it would operate as a private company after completion.
The Tel Aviv-Jaffa District Court authorized creditors’ meetings on October 20 and they were set for October 25, with objections due by October 27. The filing said the existing stay of proceedings expires on October 30 and that the closing deadline is November 15.
REE describes its own platform as fully x-by-wire steering, braking and drive, with a central computer unifying zonal controllers and over-the-air updates across the fleet.