CC Neuberger Principal Holdings I Files $300M SPAC


CC Neuberger Principal Holdings I Files $300M SPAC

CC Neuberger Principal Holdings I (PCPL.U), made a surprise filing Friday evening for a $300 million IPO. CC Neuberger is being co-sponsored by Chinh Chu’s CC Capital and Neuberger Berman’s Opportunistic Capital Solutions Master Fund LP (“NBOKS”). Hence, the name “CC Neuberger”.  However, if you read the prospectus, CC Capital and Neuberger Berman have “entered into an arrangement whereby they have agreed to co-sponsor a series of SPACs“. So this is the first, but certainly not the last we’ll see from CC Neuberger.

Naturally, Chinh Chu will be leading this team as CEO and director, but will joined by Douglas Newton as CFO, and Charles Kantor, as Director.  However, it appears there will be two more Directors that will be added at a later date since those slots are currently left blank. Nonetheless, Chinh Chu, the former Blackstone Group dealmaker, previously completed his first SPAC (CF Corporation) by combining with U.S. annuities and life insurer, Fidelity & Guaranty Life (NYSE: FG) in a deal worth around $1.84 billion.  Chinh Chu is also currently on the $440 million Collier Creek SPAC, as Vice Chairman. However, Collier Creek is still searching for a target company within the consumer goods sector, but maybe the filing of CC Neuberger is an auspicious sign that they’re close to announcing (current market conditions not withstanding). Or, maybe they’re just trying to get this SPAC IPO’d before even the SPAC window shuts.  You never know.  It’s a weird time.

However, as far as the rest of the team, Douglas Newton, as CFO, is also a CC Capital member, but more importantly, he was the CFO of CF Corporation, the SPAC.  So Mr. Newton brings SPAC experience to the table as well.  Charles Kantor, on the other hand, represents the Neuberger Berman side of the equation, and is currently a Managing Director at Neuberger Berman after joining the firm in 2000.  Additionally, Mr. Kantor is the founder and Senior Portfolio Manager of the Kantor Group, which manages over $5 billion of equity and fixed income securities for institutional and high net worth investors.

Lastly, Koch Industries (yes, those guys) plays a role in this SPAC as well in the form of an anchor investor of NBOKS.  NBOKS has committed to a forward purchase agreement for CC Neuberger I, as well as any subsequent CC Neuberger SPACs.  However, for this first SPAC, NBOKS will be committing $200 million worth of units at $10.00, but rather than a 1/4 warrant included in its unit (to match the public warrants) it will have a 3/16th warrant included in the forward purchase units, or 0.1875 of a warrant expressed as a decimal.  For a $200 million FPA, that equals 3,750,000 warrants.  However, this forward purchase agreement is a little unusual in that “NBOKS intends to raise additional committed capital“, but if they do not have sufficient committed capital, they’re not obligated to purchase the FPA units. Meaning, they haven’t raised the $200 million yet. However, it’s unclear how difficult it will be to raise capital for this FPA.  I don’t know….if I’m an investor of NBOKS, I’d want a 1/4 warrant, not a 3/16th warrant. Wouldn’t it be better to just invest at the IPO? There’s no guarantee of sweeteners.

Furthermore, as mentioned in the Fortress Value post, CC Neuberger’s sponsor will be purchasing their at-risk warrants for $1.00, rather than $1.50 or $2.00, which means the sponsors will own 8,000,000 warrants based on an $8.0 million purchase.  That’s 500,000 more warrants than the 7,500,000 public warrants.  An additional 3,750,000 FPA warrants means there would potentially be 19,250,000 warrants outstanding. That’s not a small amount of dilution.

1/4 Warrant SPACs

at-risk quarter warrant spacs

Having said that, Chinh Chu is the real deal and his prowess at Blackstone means many investors (both long only and SPAC) will absolutely take a chance on this SPAC. However, it would have been preferable if the sponsors were buying their at-risk warrants at $2.00, or even $1.50, to reduce some of that dilution.  Don’t get me wrong…it’s gonna sell anyway, but it would have really flown off the shelves if it came out with something slightly more market friendly.

Summary of terms below:

CC Neuberger summary of terms 3-9-20 2