But are they hoping to bust their deal with Gateway?

Leisure Acquisition Corp. (LACQ), filed a new proxy this morning for a June 23rd extension vote that would move their completion deadline to December 1, 2020, a full five months away. However, there were a few items of note in today’s filing that differed from their previous preliminary proxy.

First, Leisure will not be making a contribution to trust for non-redeeming shareholders at this vote, despite asking for five additional months time.  Generally speaking, when a SPAC asks for a significant amount of time without providing additional funds to trust, it results in a heavy amount of redemptions.  But sometimes that’s by design if a SPAC wants to remove SPAC shareholders and replace the cash with a PIPE.  Or, if they need to reduce the trust size because they have too much money to make an intended combination work.  However, if you recall, at Leisure’s last vote on March 26th, the sponsors did not offer a contribution at that time either and it resulted in redemptions of $176.3 million, leaving just $21.3 million in trust. However, based on the current transaction with Gateway (although, presumably this deal needs to be re-struck now) they’re going to need more than $21.3 million cash they currently have.  The do have a $30 million PIPE with HG Vora, but post extension vote, that might be the only cash available to fund this combination thanks to redemptions.

However, the other item of note found in today’s proxy is that it specifically mentions that both Leisure and Gateway have the ability to terminate the Merger Agreement if the combination has not been completed by July 15, 2020.  Oh, really?  But there is no mention of wanting to move that date further out.  And since Leisure is asking for an extension to December 1st, they are leaving themselves some room post July 15th to search (and/or announce) a new combination.

Like Far Point (FPAC), Leisure cannot just terminate their current transaction right now.  However, that’s IF they want to terminate…we don’t know that yet.  But the legal language in their combination documents leaves Leisure a little more room to maneuver than FPAC as far as termination.  The problem is, if Leisure terminates early, they have to pay Gateway a fee of $9,509,235.  So IF terminating the Gateway deal is on the menu, it would be better to wait until July 15th.

However, by not offering a contribution to trust at their extension vote, they are effectively making it much harder to actually do the Gateway deal without a significant amount of additional financing, vis-a-vis, an additional PIPE.  And since they only have until July 15th to close this deal, getting a big PIPE in three weeks time would be extremely challenging to do. Particularly since Covid-19 most likely had an impact on Gateway’s casino business thanks to lock-downs and social distancing measures.  So getting institutional interest in a Gateway deal could be challenging.

So let’s say Leisure holds their vote on June 23rd and they’re left with something like $5 million in trust after redemptions.  They then wait it out until July 15th, terminate the deal and have until December 1st to announce and close a new transaction.  However, any new deal would have to either be very small, or require a big PIPE.  But….with only $5 million in trust, that’s not a lot of shareholders that you need to worry about redeeming at a new completion vote.  So structuring a new transaction is actually easier.  It’s more like a true reverse merger into a shell.

However, this is all theoretical.  As usual, we’ll have to wait and see how this all plays out, but on the face of it, it’s getting less likely the Gateway transaction will complete.