Fortress Investment Group has agreed to modify its $11 million financing deal with Inventergy for a fifth time, waiving several requirements for the borrower as it looks to restructure.
In a Thursday statement, Inventergy, an intellectual property licensing company, said its New York-based alternative lender agreed to waive its September amortisation payment and a requirement that the company have a minimum $1 million of cash in the bank. The extension, according to the announcement, will give time to finalise an agreement that will allow Fortress to monetise Inventergy’s 760 telecommunications patents.
The 1 October 2014 financing agreement consisted of $10 million in senior secured notes and $1 million of restricted common stock at $2 per share, funding used to pay off existing debt and as general working capital.
The notes, which mature 30 September 2017, bear interest Libor plus 7 percent. The monthly amortisation payments are equal to the amount outstanding divided by the number of months left before the debt comes due. The funding arrangement also included a revenue sharing agreement stipulating some money realised from the sale of certain patents be put toward the notes.
Spokesmen for Fortress and Inventergy were not immediately available for comment.
In its Q2 2016 earnings report filed on 15 August with the SEC, Inventergy said its $57.7 million deficit and 11 August cash balance of $469,389 “raise substantial doubt” about its ability to remain a going concern. Business operations may be dependent on obtaining additional financing, the company said. Over the next year, Inventergy estimated it would need $7.4 million for loan payments to Fortress.
According to a term sheet in a letter dated 27 September, also filed with the SEC, the parties have agreed on a restructuring that would replace the $11 million financing with a new revenue sharing agreement. Under the terms of the deal, Fortress and Inventergy would split proceeds from the sale of its patents, which Inventergy acquired from Panasonic, Nokia and Huawei, pending enough money is realised from a sale of the patents.
Specifically, pursuant to the revenue sharing agreement, the initial proceeds would go to the patents’ prior owners to pay off any required amounts, including $2.2 million owed to Nokia. Fortress would then receive $30.5 million along with any cash advances made to Inventergy to maintain the patent assets before a sale closes and 20 percent interest on those advances. If any revenue remains, 70 percent would go to Fortress, while 30 percent would go to Inventergy.
Disclosure of the restructuring term sheet comes after four earlier amendments to Fortress’s financing deal.
Among other terms, the first modification to the agreement, reached in February 2015, made $3 million more in senior notes available to Inventergy through 31 December 2015. Details about the second agreement were unclear.