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Apollo Capital to provide Redfin (RDFN) up to $250 million loan facility

October 23, 2023 5:47 PM EDT

Redfin Corporation (NASDAQ: RDFN) today announced that funds managed by Apollo Capital Management, L.P. and its affiliates have agreed to commit up to $250 million of financing for Redfin in the form of a first lien term loan facility. Redfin borrowed half of the loan on October 20, 2023 and the remainder will be available as a delayed draw during the following 12 months. Redfin will use cash on the balance sheet to simultaneously repurchase a portion of the company’s existing convertible notes. This transaction strengthens Redfin's balance sheet by extending our debt maturities into 2028, gives Redfin the flexibility to repurchase or repay additional convertible debt going forward, and also reflects Apollo’s support for Redfin’s long-term success.

The facility is pre-payable at par, after 12 months of call protection (during which prepayment would be at 101% of par), or with respect to prepayments made with respect to a change of control, at 101% of par, and carries a five-year term. Interest will be charged at SOFR +575 basis points for the first five full fiscal quarters after closing, with step-downs to SOFR +550 basis points and SOFR +525 basis points thereafter upon achieving agreed performance metrics. The facility includes a financial covenant, which requires the maintenance of aggregate consolidated liquidity (defined as unrestricted cash plus cash equivalents) of $75 million, tested quarterly. The negative covenants include restrictions on the incurrence of liens and indebtedness, investments, certain merger transactions and other matters, all subject to certain exceptions.

The facility includes customary events of default that, include among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control, and certain material ERISA events. The occurrence of an event of default could result in the acceleration of the obligations under the facility.

As security for its obligations under the facility, Redfin granted Apollo a first priority security interest on substantially all of Redfin’s assets and the assets of its material subsidiaries, subject to certain exceptions.

As part of the transaction, Redfin has agreed to repurchase $5 million principal amount of its convertible notes due in 2025 held by Apollo and $72 million principal amount of its convertible notes due in 2027 held by Apollo for an aggregate repurchase price of approximately $50 million using cash on the balance sheet (the “Apollo Repurchase”). In addition, Redfin retains the ability to use proceeds from the transaction to buy additional convertible notes in the open market or via privately negotiated transactions as well as the ability, should the need arise, to address the convertible notes at maturity, repay preferred equity, pay interest, pay fees and expenses, and general corporate purposes.

The foregoing summary and description of the provisions of the facility does not purport to be complete and is qualified in its entirety by reference to the full text of the facility, a copy of which will be filed as an exhibit to our Quarterly Report on Form 10-Q for the three months ended September 30, 2023.

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