Banyan Acquisition Corp. (BYN) Signs Term Sheet for $50M in Notes Funding

Banyan Acquisition Corp. (BYN) Signs Term Sheet for $50M in Notes Funding

Banyan (NYSE:BYN) has signed a non-binding term sheet for $50 million in convertible notes on a five-year term for its combination with hospitality venture Pinstripes.

These are to be issued no later than December 29 and the parties expect the business combination will close by then. Should this financing become definitive, Pinstripes would waive the transaction’s $75 million minimum cash condition.

The notes will carry a 12.5% interest rate per annum payable quarterly in cash or in-kind until the end of 2024, after which this must be paid in cash only. After that point, an additional 7.5% interest rate will apply payable in either cash or in-kind contributions.

The unnamed “large institutional investor” that is funding the notes will also receive warrants exercisable for 2,500,000 shares at a strike price of $0.01 per share. Should the combined company’s stock drop below a VWAP of $8 in the period between 91 days after close and 90 days thereafter, then the investor is to receive warrants for 187,500 more shares and 412,500 if the VWAP is below $6.

The investor may also decide between nine months and a year out from the deal’s closing to purchase $40 million more convertible notes under similar terms. If it did so, it would also receive warrants for 1,750,000 shares and 1,900,000 more if the $6 VWAP trigger hits.

All of this ups the ante significantly for Pinstripes to perform well out of the gate, but also provides it with the capital to do so. The Northbrook, Illinois-based company runs a chain of 14 bistros featuring on-site bowling, bocce ball and other entertainment with five more under development.

A November rehash of the deal also banked on Pinstripes bocce balling its way to profits with 4,000,000 in forfeited promote shares set to be distributed to company shareholders if its 2024 EBITDA exceeds $28 million.

The chain has shown great confidence in its business model by counting on growth from its new locations to hit the various targets set by both the transaction and this new financing. But, should it miss the mark, it could see some cascading negative events hit with lost upside and additional dilution.

The parties’ latest S-4 did not lay out the company’s recent performance in EBITDA terms, but noted that it notched a -$7.5 million net loss in its fiscal year ending April 30, 2023.

There is certainly precedent for things going according to plan, however. Pinstripe’s most direct de-SPAC comp is Bowlero (NYSE:BOWL), which has traded above $9 since mid-2022 having closed its combination with Isos in December 2021. It last closed as a public company at $11.32.

A more recent entry to the field of hospitality de-SPACs, Falcon’s Beyond (NASDAQ:FBYD), is trading similarly well at $11.99 having closed its combination with FAST II in October.