ErosSTX Global (ESGC) Files an Extension for its Fiscal 2021 Annual Report; Provides Debt Restructuring Update
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Eros STX Global Corporation (NYSE: ESGC) (“ErosSTX” or the “Company”) filed a Form 12b-25 with the SEC regarding an extension of the filing deadline for the Company’s Annual Report on Form 20-F for fiscal 2021 (ended March 31, 2021), which was originally due on August 2, 2021 (within four months of the end of the fiscal year). The Form 12b-25 filing automatically grants the Company a 15-day extension to file its Annual Report on or before August 17, 2021. In addition, the Company is providing an update on its debt restructuring.
On July 30, 2020, a subsidiary of Eros STX (formerly known as Eros International Plc) merged with and into STX Filmworks, Inc. (“STX”), with STX surviving as an indirect and wholly owned subsidiary of the Company (the “Merger”). The Merger was accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805, with STX as the accounting acquirer of the Company.
The Form 12b-25 states that the Company is unable to file its Annual Report on Form 20-F for the fiscal year ended March 31, 2021 by the August 2, 2021 due date, without unreasonable effort or expense, primarily because the Company’s Audit Committee is currently conducting a formal internal review of certain accounting practices and internal controls related to its Eros subsidiaries. Significant revenue from these subsidiaries may not have been appropriately recognized during the fiscal year ended March 31, 2020. Further, a significant portion of the receivables associated with such revenue was valued at zero for the six months ended September 30, 2020, as part of the Company’s preliminary purchase price allocation for the Merger transaction, as reflected in the Form 6-K furnished by the Company on March 31, 2021 (the “Form 6-K”). The Audit Committee has not yet completed the internal review.
Even though the internal review has not been completed, the Company currently expects that substantially all of the intangible assets and goodwill reflected in the Form 6-K are likely to be impaired and that one or more material weaknesses in internal controls over financial reporting are likely to be reported. The Company cannot determine at this time when it will conclude the remaining work necessary to complete the preparation of the financial statements and assessment of its internal controls over financial reporting.
Debt Restructuring Update
The Company is considering its options under various debt arrangements, including the £50 million 6.50% UK retail bond that matures on October 15, 2021, and the requirements to deliver audited financial statements by July 31, 2021.
STX Financing LLC, a subsidiary of the Company, currently has $150.1 million outstanding on the JPMorgan Asset-backed Credit Facility (the “JPM Facility”) that matures on October 7, 2021 and $22.7 million outstanding on a mezzanine facility (the “STX Mezzanine Debt”) that matures on July 7, 2022. Under these arrangements, the Company was required to deliver audited financial statements by July 31, 2021. The Company is currently working with these lenders on several options, including a waiver and extension of this deadline to deliver audited financial statements or paying off the debt. The Company cannot provide any assurances that it will be successful in obtaining any extensions or paying off the debt.
STX Financing has entered into an exclusive negotiation period with a third party to monetize the revenue from 46 films in its library, the proceeds of which would be used to repay both the JPM Facility as well as the STX Mezzanine Debt, which represents the entire debt balance of STX Financing, with additional amounts going to the Company’s balance sheet. If any transaction is agreed to, the Company expects that STX Financing will continue to administer and distribute the 46-film catalog for a fee, and will retain derivative rights to the 46 films, including sequels, remakes and prequels. This transaction is subject to negotiation of definitive documentation, and the Company cannot provide any assurances that it will be successful in completing the transaction.
In addition, Eros International Media Limited (EIML), the Company’s majority-owned and consolidated subsidiary in India, recently reached an agreement with its India Banking Consortium to refinance $63 million (INR 4.68 billion) of outstanding debt. The agreement was completed under the Reserve Bank of India’s Resolution Framework for COVID-19 Related Stress policy. The agreement reduces the annual interest rate on the debts to 9.0% from an average of 14.5% and extends the average maturity so that less than $10 million of the debt matures in the second half of fiscal 2022, with the remainder maturing in fiscal 2023 and 2024.
About Eros STX Global Corporation:
Eros STX Global Corporation, (“ErosSTX”) (NYSE: ESGC) is a global entertainment company that acquires, co-produces and distributes films, digital content and music across multiple formats such as theatrical, television and OTT digital media streaming to consumers around the world. Eros International Plc changed its name to Eros STX Global Corporation pursuant to the July 2020 merger with STX Entertainment, merging two international media and entertainment groups to create a global entertainment company with a presence in over 150 countries. ErosSTX delivers star-driven premium feature film and episodic content across a multitude of platforms at the intersection of the world's most dynamic and fastest-growing global markets, including US, India, Middle East, Asia and China. For further information, please visit ErosSTX.com.
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