Monocle Acquisition Corporation *

Monocle Acquisition Corporation *

Oct 19, 2020 by viktoria.v

PROPOSED BUSINESS COMBINATION: AerSale Corporation


ESTIMATED CURRENT FUNDS in TRUST: $177.2 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.27*
ENTERPRISE VALUE: $372.0 million [Updated on 12-01-20 from $299.1 million]

*SPACInsider estimate 

SUBSEQUENT EVENT [12-17-20]

It is Monocle’s understanding that if the Available Closing Cash Amount is equal to or greater than $60 million (excluding any proceeds from the Subscription Agreements entered into by the AerSale co-founders (the “Co-Founder Proceeds”)) and the other conditions to the closing of the Business Combination are satisfied, then the parties to the Amended and Restated Merger Agreement will waive the condition to closing of the Business Combination set forth in Section 10.1(i) of the Amended and Restated Merger Agreement requiring that the Available Closing Cash Amount be equal to or greater than $75 million.

Receipt of the proceeds from the Subscription Agreements (excluding the Co-Founder Proceeds) plus the proceeds from the Trust Account are anticipated to exceed $60 million.

PIPE: Monocle and NewCo also entered into subscription agreements with investors on December 16, 2020, the Investors agreed to subscribe for and purchase in the aggregate, 7,562,500 shares of NewCo’s common stock, for a total aggregate purchase price of $60.5 million. (Approx. $8.00)

The Investors include leading investment funds, family offices and the AerSale co-founders. The proceeds of the Investments will be used to close the Transaction and for general corporate purposes, including growth initiatives.

Founder Shares Agreement: the Founders have agreed to forfeit an aggregate of 3,470,312 shares (the “Forfeited Shares”) of Monocle’s common stock, with 842,188 Founder Shares remaining (the “Remaining Founder Shares”).

The Founders also agreed to defer the vesting of an aggregate of 700,000 shares of Remaining Founder Shares, half of which will vest at such time as the NewCo Common Stock price is greater than $13.50 per share for any period of twenty (20) trading days out of thirty (30) consecutive trading days and the other half of which will vest at such time as the NewCo Common Stock price is greater than $15.00 per share for any period of twenty (20) trading days out of thirty (30) consecutive trading days.

Issuance Agreement: the Advisors agreed to waive certain fees owed by Monocle in connection with the Business Combination with an aggregate value of approximately $3,624,528 million, in exchange for an aggregate number of shares of NewCo Common Stock equal to 362,453 (the “Issuance”)

Letter Agreement: NewCo agreed to increase the amount of additional contingent consideration that certain stockholders of AerSale are entitled to receive by 100,000 additional shares of NewCo Common Stock in the aggregate, with 50,000 of such shares issuable if the closing sale price per share of NewCo Common Stock is greater than $13.50 for any period of 20 trading days out of 30 consecutive trading days, and the remaining 50,000 of such shares issuable if the closing sale price per share of NewCo Common Stock is greater than $15.00 for any period of 20 trading days out of 30 consecutive trading days, in each case on or prior to the fifth anniversary of the Closing.


UPDATE [12-1-20]: After seeing over 93% of its trust get redeemed in November, Monocle re-filed its presentation on December 1, 2020. The updated presentation now includes a PIPE at $75M and a reduced equity valuation of $404.7M (down from $427.1M). Since the company will be left with less cash, the enterprise value of the transaction rose to $372.0M (up from $299.1M).

Revised Sources & Uses Table below:

 


NEW PIPE [12-01-20]

  • $75M in additional proposed equity financing at $10.00 per share

Monocle Acquisition Corp. proposes to combine with AerSale, a global provider of aviation aftermarket products and services. Upon completion of the combination, AerSale Corporation will become a Nasdaq-listed public company, with an implied enterprise value of approximately $430 million, equating to approximately 6.3x AerSale’s forecasted 2020 Adjusted EBITDA.

AerSale, which is currently owned by Leonard Green & Partners, Florida Growth Fund LLC and the Company’s two founders, is a leading global supplier of aftermarket aircraft, spare engines, flight equipment, maintenance, repair and overhaul (MRO) services, and used serviceable material (USM) support. The Company also provides a broad range of internally engineered proprietary repairs, products, modifications, upgrades, and other cost-saving technical solutions. AerSale focuses on commercial aircraft and engines from their mid-life phase of operating service through asset retirement.


Transaction Summary

Under the terms of the merger agreement, existing AerSale shareholders, including Leonard Green & Partners, will receive $250 million in cash and $150 million in newly issued common equity at closing, subject to adjustment to the mix of consideration under certain circumstances.

The cash component of the purchase price is expected to be funded by Monocle’s cash in trust and the proceeds of an asset backed debt financing facility.  Monocle has secured a commitment for this facility from Wells Fargo Bank, N.A. and PNC Bank, National Association, and may seek to raise additional capital through junior debt or other sources of debt financing.

Under certain conditions, the parties have the option to reduce the cash consideration to not less than $200 million in exchange for the issuance of up to $50 million of convertible preferred equity to existing AerSale shareholders.

In connection with the transaction and after closing, existing AerSale shareholders will also have the right to receive $33 million in additional value in stock consideration based on the post-closing share price performance.

  • Cash consideration of $250 million
  • Shares: $150 million in newly issued common equity

SUBSEQUENT EVENTS

Monocle entered into a commitment letter, dated as of January 26, 2020 (the “FILO Commitment Letter”) with Veritas Capital Credit Funding, L.P. (“Veritas”), pursuant to which Veritas has committed to provide Monocle a senior secured asset-based “first-in/last-out” term loan with an aggregate commitment of up to $75 million (“FILO Facility”).

  • Monocle intends to use the net proceeds of the FILO Facility to finance a portion of the cash consideration payable in the Business Combination.
  • The FILO Facility will mature on
    • (a) the fourth (4th) anniversary of the closing date (the “Closing Date”) of Monocle’s pending business combination with AerSale Corp. (the “Business Combination”), or
    • (b) if the scheduled maturity date of the asset-based revolving credit facility (the “ABL Facility”) is extended to after the fourth (4th) anniversary of the Closing Date, the earlier of:
      • (i) the scheduled maturity date of the ABL Facility and
      • (ii) the fifth (5th) anniversary of the Closing Date.

Debt Financing

  • Monocle and NewCo entered into a debt commitment letter with Wells Fargo Bank, N.A. and PNC Bank, N.A., dated December 8, 2019 (the “Debt Commitment Letter”), in connection with a $150 million senior secured asset-based revolving credit facility (the “ABL Facility”).

Earn-out

  • 2,500,000 additional shares of NewCo Common Stock
    • 1.25 million shares if NewCo Common Stock price is greater than $12.50 per share for any period of twenty (20) trading days out of thirty (30) consecutive trading days on or prior to the fifth anniversary of the date of the Closing (the “Closing Date”)
    • 1.25 million shares if NewCo Common Stock price is greater than $14.00 per share for any period of twenty (20) trading days out of thirty (30) consecutive trading days on or prior to the fifth anniversary of the date of the Closing (the “Closing Date”)
  • The Earnout Shares will also be issued upon the occurrence of a Liquidity Event (as defined in the Merger Agreement), solely to the extent the Liquidity Event Consideration (as defined in the Merger Agreement) is greater than $12.50, in which case half of the Earnout Shares will be issued, or $14.00, in which case the other half of the Earnout Shares will also be issued. Earnout Shares that have not been issued on or prior to the fifth anniversary of the Closing Date will be cancelled.

Board

It is anticipated that the Board of Directors of the combined company will be comprised of eight members:

  • Its two co-founders, Mr. Finazzo and Mr. Nichols;
  • two members of the Monocle management team;
  • one member from Leonard Green & Partners; and
  • three additional independent directors.

Notable Conditions to Closing:

  • That the amount by which Necessary Cash exceeds Available Cash is not more than $50 million
    • Necessary Cash” means an amount of cash equal to
      • (a) the Aggregate Cash Consideration plus
      • (b) the Company Transaction Expenses plus
      • (c) Outstanding Monocle Expenses plus
      • (d) the Funded Debt under the First Lien Credit Documents.
    • Available Cash” means, as of immediately prior to the Closing, an aggregate amount equal to:
      • (i) the cash available to be released from the Trust Account, minus
      • (ii) the aggregate amount of all payments to be made as a result of the completion of all Monocle Share Redemptions, plus
      • (iii) the amount of cash proceeds actually received by Monocle pursuant to the Debt Financing, plus
      • (iv) the cash and cash equivalents of the Company and its Subsidiaries in immediately available funds (excluding
        • (x) the aggregate amount of outstanding and unpaid checks issued by or on behalf of the Company or its Subsidiaries as of such time and
        • (y) any cash or cash equivalents of the Company or its Subsidiaries not freely usable by the Company or its Subsidiaries because it is subject to restrictions, limitations or Taxes on use or distribution by Law, Contract or otherwise).

Notable Conditions to Termination:

  • If the Closing has not occurred on or prior to August 31, 2020 (the “Termination Date”)

Founders Shares and Private Placement Units

FOUNDER SHARES – 4,312,500 at IPO

  • Founders have agreed to defer the vesting of an aggregate of 1,293,750 Founder Shares (representing 30% of the Founder Shares) (the “Unvested Founder Shares”)
    • half will vest if the share price is greater than $12.50 per share for any period of twenty (20) trading days out of thirty (30) consecutive trading days
    • the other half of which will vest if the share price is greater than $14.00 per share for any period of twenty (20) trading days out of thirty (30) consecutive trading days.
    • The Unvested Founder Shares will also vest upon the occurrence of a Liquidity Event on or prior to the fifth anniversary of the date of the Founder Shares Agreement, solely to the extent the Liquidity Event Consideration is greater than $12.50, in which case half of the Unvested Founder Shares which will vest, or $14.00, in which case the other half of the Unvested Founder Shares will also vest.
    • Unvested Founder Shares that have not vested on or prior to the fifth anniversary of the Closing Date will be forfeited.

PRIVATE PLACEMENT UNITS – 717,500 purchased at IPO

  • None to cancelled/forfeited

Monocle transaction summary 9-24-20


ADVISORS

Monocle is being advised by:

  • PJT Partners
  • Cowen
  • Cadwalader, Wickersham & Taft LLP
  • Greenberg Traurig, LLP
  • Alton Aviation Consultancy

AerSale is being advised by:

  • RBC Capital Markets
  • Harris Williams
  • Latham & Watkins LLP

MONOCLE ACQUISITION CORP. MANAGEMENT & BOARD

Executive Officers

Eric J. Zahler, 68
President, Chief Executive Officer & Director

Mr. Zahler has 35 years of senior leadership, strategy, operations, management, and governance experience related to our target markets and target industries. Mr. Zahler was a co-founder and Managing Director of Sagamore Capital, a private equity firm pursuing investments in the aerospace and defense, industrial electronics and selected business service markets. Prior to founding Sagamore Capital in July 2008, Mr. Zahler was President and Chief Operating Officer of Loral for eight years and also served on Loral’s Board of Directors. As COO, Mr. Zahler was responsible for overseeing all aspects of Loral’s business strategy and operations, with company-wide profit and loss responsibility. As a senior member of the management of Loral since 1992, he was integrally involved in identifying, evaluating, negotiating, and integrating Loral’s acquisition growth strategy in the aerospace and defense and satellite services industries, actively leading over $16 billion of acquisitions and divestitures. While at Loral, Mr. Zahler was responsible for the development and implementation of annual operating budgets, including revenue attainment, operating expenses, capital expenditures, and research and development. He was also responsible for business development activities, including mergers and acquisitions, divestitures, joint ventures, and third-party investments, and for supervising all commercial and legal activities. He also initiated and implemented a major operational reorganization of Loral’s satellite manufacturing operations and was actively involved in substantial capital raising and restructuring activities, and the development, operations and management of several international joint ventures with global telecommunications service providers. Mr. Zahler is a member of the Board of Directors and Chairman of the Human Resources and Executive Compensation Committee of Maxar Technologies Ltd. (NYSE: MAXR; TSX: MAXR), a leading global provider of advanced space technology solutions for commercial and government markets, including satellites, Earth imagery, and geospatial data and analytics. He is also Chairman of the Board of exactEarth Ltd. (TSX: XCT), a leading provider of global vessel tracking data for maritime situational awareness, and a member of the Board of Directors of Sequa Corporation, a portfolio company of The Carlyle Group, which provides the global airline industry with a broad range of aftermarket services and ranks as the leading independent supplier of advanced repairs for jet engine parts, and is the largest independent metal coil coater in North America. Previously, Mr. Zahler served on the Board of Directors and Audit Committee of Actel Corporation (NASDAQ: ACTL), a leader in low-power FPGAs and mixed-signal FPGAs for aerospace, military, satellite, medical, and industrial applications, and on the Board of Directors and Audit Committee of EasyLink Services Corporation, (NASDAQ: EASY), a global provider of outsourced business process automation services; and served as the Chairman of the Board of Directors of USN, a subsidiary of the SSC, an entity owned by the Government of Sweden. SSC/USN is a global provider of mission critical systems and services to the space and aerospace markets. As Chairman of USN, Mr. Zahler’s appointment was approved by the U.S. Department of Defense to ensure compliance with a Special Security Agreement (SSA), FOCI requirements and other national security policies. From 1975 to 1992, Mr. Zahler was an attorney at Fried, Frank, Harris, Shriver & Jacobson, where he was elected Partner in 1983. At Fried, Frank, he represented numerous aerospace and defense companies in all aspects of their interactions with the U.S. government. Mr. Zahler graduated, cum laude, from Harvard Law School in 1975, where he was editor of the Harvard Journal on Legislation. He earned a Bachelor’s of Science degree, cum laude, in mathematics from Yale University in 1972.


Richard J. Townsend, 68
Executive Vice President & CFO

Mr. Townsend has 39 years of finance, strategy and operations experience related to our target markets and target industries. Mr. Townsend has served as an Advisory Partner at Rangeley Capital, a private investment partnership focused on investments in the event space, since January 2017. Mr. Townsend served as a Managing Partner of Rangeley Capital, with responsibilities as a Portfolio Manager and as the Chief Operating Officer, from January 2008 through January 2017. During this period, Rangeley Capital grew its NAV (net asset value) by a factor of 9.5x. Mr. Townsend focused his experience in evaluating operating management teams’ capabilities and identifying undervalued event opportunities in the public market. Prior to joining Rangeley Capital, Mr. Townsend was the Executive Vice President and Chief Financial Officer of Loral from 1998 to 2007, where he was responsible for all financial aspects of the business, including financial assessment and implementation of corporate strategy; performance measurement and assessment of all operating management teams, focusing on capturing profit improvement as well as internal and external growth opportunities; SEC reporting requirements; treasury operations; external communications to shareholders, business analysts, and rating agencies; business controls, and corporate governance. As part of the small senior management team, Mr. Townsend led the financial team’s participation in the company’s key strategic business development activities, including mergers, acquisitions, and joint ventures. From 1996 to 1998, Mr. Townsend served as the Corporate Controller and Director of Strategy of ITT Industries, which was the remaining public company after ITT spun off Sheraton Hotels and Hartford Insurance. As the Corporate Controller and Director of Strategy of an effectively new public company, Mr. Townsend was responsible for developing and implementing key financial processes, including, a strategy development and implementation process; budgeting and measurement for the operating business units; and the public reporting process, including communications to shareholders, analysts, and rating agencies. In this early period of ITT Industries, the initial corporate strategy was to sell the automotive supplier business while investing in the water pump and defense and electronics businesses through acquisitions. Mr. Townsend spent the prior 17 years gaining experience in financial management and assessment of businesses while working at IBM. Starting at IBM after earning his MBA from Stanford University in 1979, he gathered experience in all aspect of financial management of a large international public company through holding positions of increasing responsibility in all areas of finance, planning, and accounting. His final two assignments at IBM were as Controller of Europe, Mideast and Africa located in Paris, France, which managed a third of IBM’s total business, and as Assistant Corporate Controller for Financial Planning, during which assignment, Mr. Townsend was responsible for all aspects of financial planning and measurement for IBM. Mr. Townsend started his career as a mechanical engineer at GE’s Nuclear Energy Division after earning his Bachelor of Science degree from the University of Michigan in 1972. While at GE, Mr. Townsend earned a Master of Science degree in Engineering from the University of California at Berkeley in 1977 and became a Professional Engineer in the state of California.


 

Board of Directors

Sai S. Devabhaktuni, 47
Chairman of the Board

Mr. Devabhaktuni has over 25 years of experience analyzing and investing in a broad range of sectors with specific focus in our target markets and target industries. Investing across several economic cycles, Mr. Devabhaktuni has served on numerous creditors’ committees and boards of directors and employs an active approach to investing. Mr. Devabhaktuni has written numerous thought pieces and has participated as a subject matter expert in industry conferences. From January 2012 to March 2018, Mr. Devabhaktuni was an Executive Vice President and Head of Corporate Distressed Portfolio Management at PIMCO. While at PIMCO, Mr. Devabhaktuni was Co-Chair of the Investment Committee of the PIMCO Corporate Opportunities Fund II. Mr. Devabhaktuni was also instrumental in business growth initiatives which led to the increase in assets under management by 6.8x for portfolios dedicated to corporate stressed and distressed investing. Prior to joining PIMCO, Mr. Devabhaktuni founded TMG, an investment firm investing in inefficient markets with an emphasis on debt, equity and other obligations of financially stressed businesses. Prior to TMG, Mr. Devabhaktuni was one of three Managing Principals at MHR, which he joined in 1998. During his tenure at MHR, Mr. Devabhaktuni was involved in all aspects of the investment process, including identifying, structuring and conducting due diligence on investment opportunities, including acquisitions and dispositions. Mr. Devabhaktuni worked collaboratively with senior management teams of MHR portfolio companies on operational improvements and growth initiatives, as well as on mergers, acquisitions, divestitures and financing activities. Prior to MHR, Mr. Devabhaktuni was a member of the event driven strategies group at Highbridge, and a member of the corporate finance, capital markets, and emerging markets groups of Nomura. Mr. Devabhaktuni holds a Bachelor of Science in Economics, with concentrations in Finance, Economics and Legal Studies from the Wharton School of the University of Pennsylvania. Mr. Devabhaktuni has served on the Board of Directors of Loral and Applied Natural Gas Fuels Inc., and currently serves on the Board of Directors of Sequa Corporation.


C. Robert Kehler, 66
Director Nominee

Mr. Kehler has 43 years of leadership, strategy and governance experience related to our target markets and target industries, and service to the United States of America. General Kehler currently serves on the board of directors of Maxar Technologies Ltd. (Ticker: MAXR) and Inmarsat plc (Ticker: ISAT LN), and is a trustee of the Mitre Corporation, a senior advisor to McKinsey and Company and special advisor to EaglePicher Technologies, LLC. General Kehler retired from the United States Air Force in December 2013 after almost 39 years of distinguished service. From January 2011 until November 2013 he served as the Commander, United States Strategic Command (USSTRATCOM), where he was directly responsible to the Secretary of Defense and President for the plans and operations of all U. S. forces conducting strategic deterrence, nuclear alert, global strike, space, cyberspace and associated operations. While in command, he crafted and implemented policies and plans to deter strategic attacks against the U.S. and its key allies, and led a joint team of over 160,000 military and civilian members conducting global deterrence operations while supporting combat actions in the Middle East and North Africa. General Kehler’s military career encompassed progressively important operational, command, staff, and joint assignments. Prior to commanding USSTRATCOM, General Kehler commanded United States Air Force Space Command and two operational space wings conducting space launch, missile warning, and space control missions. He also commanded an intercontinental ballistic missile (ICBM) squadron and group. At Air Force Space Command, he designed the Air Force’s inaugural blueprint, operating concept, organizational structure, and personnel program to meet rapidly growing cyberspace challenges. General Kehler entered the Air Force in 1975 as a Distinguished Graduate of the Pennsylvania State University R.O.T.C. program, has master’s degrees in Public Administration and National Security and Strategic Studies, and completed executive development programs at Carnegie-Mellon University, Syracuse University, and Harvard University. His military awards include the Defense Distinguished and Superior Service Medals, the Distinguished Service Medal (2 awards), Legion of Merit (3 awards), and the French Legion of Honor (Officer). General Kehler continues to offer his expertise as a consultant, adviser and corporate director. He speaks widely on matters of national security and is highly sought for panels, studies, Congressional testimony, and workshops addressing the most compelling issues of national security in the 21st Century. General Kehler was the S.T. Lee Distinguished Lecturer at Stanford University’s Freeman Spogli Institute for International Studies for academic year 2014 – 2015, and remains an Affiliate of Stanford’s Center for International Security and Cooperation. He is a Senior Fellow of the National Defense University.


Donald W. Manvel, 68
Director Nominee

Mr. Manvel has 46 years of strategy, operations, manufacturing and turnaround experience related to our target markets and target industries. Mr. Manvel is currently Chairman and CEO of AVL Americas, and a member of the Executive Leadership Team of the parent company based in Austria (“AVL”). AVL is the world’s largest independent company for the development of gasoline, diesel, and alternative fuel powertrain systems, as well as fuel cell and hybrid technologies. Mr. Manvel joined AVL in 2002 and is responsible for leading the development and execution of the company’s long-term strategy for the Americas, with a view to creating shareholder value. From July 2012 to April 2015, Mr. Manvel served as the CEO of Unycom GmbH, an enterprise software company dedicated to the field of intellectual property management. Prior to AVL and from 1999, Mr. Manvel was Acting President and Senior Vice President of Operations at DEKA Research and Development (“DEKA”). At DEKA, Mr. Manvel oversaw the development and implementation of operations and supply chain systems and played a leading role in the development of the Segway Human Transporter, the first self-balancing, electric transportation device. Prior to DEKA, Mr. Manvel was President of the Manlift Division of Grove Worldwide (“Manlift”). While at Manlift, Mr. Manvel managed all aspects of its operations, leading to significant cost improvements, a reduction in design cycle times for the firm’s products, and eventually the sale of the company. Mr. Manvel began his career with Chrysler Corporation in 1972, where he held a variety of senior executive positions including Corporate Manager of Systems and Scheduling for the entire corporation, General Manager and Platform Executive for the company’s Jeep operations, Managing Director of Chrysler Austria and Chrysler Eurostar, and President of DaimlerChrysler Venezuela. Mr. Manvel received his MBA from Wayne State University and earned a Bachelor’s of Arts degree in Business Administration from Michigan State University.


John C. Pescatore, 54
Director Nominee

Mr. Pescatore has more than 30 years of strategy, operations, finance and accounting experience related to our target markets and target industries. From 2004 to September 2018, Mr. Pescatore served in various capacities as Vice Chairman, President, CEO and Member of the Board of Directors of pdvWireless (Ticker: PDVW, “PDV”). In October 2018, Mr. Pescatore began serving in a consulting role as an advisor to PDV. At PDV, Mr. Pescatore led its transformation from a private enterprise software company to a publicly traded wireless carrier, was instrumental in all aspects of fundraising including acquisition financing for the purchase of a nationwide spectrum position through a strategic transaction with a Tier One carrier, embarked on a process to modernize thirty year old Federal Communications Commission rules to allow for spectrum efficiency and for the deployment of more efficient technologies, and launched the company’s wireless service in seven major market areas within the United States. Prior to PDV, Mr. Pescatore was EVP & COO of NeoWorld Communications, Inc. (“NeoWorld”), which was founded to develop a nationwide wireless network and held spectrum in major markets throughout the United States. At NeoWorld, Mr. Pescatore was a member of the core team which led the company’s successful sale to Nextel Communications, Inc. (“Nextel”). Prior to NeoWorld, Mr. Pescatore was Executive Vice President of Operations of Expanets, Inc. (“Expanets”), one of the fastest growing voice and data communications solutions and services companies in the United States. As one of the key architects in building Expanets, Mr. Pescatore oversaw the business through a period of enormous growth by strategic acquisitions, building the company to over U.S.$1 billion in sales and over 3,000 employees. Prior to Expanets and from 1989 to 1998, Mr. Pescatore was a key member of the team that grew Nextel from a start-up to a national wireless service provider. During his tenure at Nextel, Mr. Pescatore held a variety of senior managerial and supervisory positions including Assistant Controller, Vice President of Operations, President of the Specialized Mobile Radio Division and President of the New York Area. Mr. Pescatore began his career as a consultant with Deloitte in 1986 within the firm’s Emerging Business Services Group, where he developed his expertise in telecommunications. Mr. Pescatore earned a Bachelor of Science degree in Accounting from New York University, was a Certified Public Accountant, and, for nine years ending in November 2014, served as a Board Member and Chair of the Audit Committee at Covenant House International.