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Item 1.01
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Entry into a Material Definitive Agreement.
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Subscription Agreement
On June 30, 2022, FTAI Infrastructure LLC (“FTAI Infrastructure”)
and Transtar, LLC (“Transtar”), both subsidiaries of Fortress Transportation and Infrastructure Investors LLC (the “Company”), entered into Subscription Agreements (collectively, the “Subscription Agreement”) with entities
affiliated with Ares Management LLC (collectively, the “Subscriber”). Pursuant to the Subscription Agreement, FTAI Infrastructure agreed to sell to the
Subscriber (i) 300,000 shares of newly-created Series A Senior Preferred Stock with a par value $0.01 per share (the “Series A Preferred Stock”), (ii) warrants
(the “Series I Warrants”) representing the right to purchase, on the terms and subject to the conditions set forth in the Series I Warrants, 3,342,566 shares
of common stock of FTAI Infrastructure, with a par value of $0.01 per share (“Common Stock”), at an exercise price of $10.00 per share (as adjusted in
accordance with the agreement governing the Warrants (as defined below) (the “Warrant Agreement”)), and (iii) warrants (the “Series II Warrants” and, together with the Series I Warrants, the “Warrants”) representing the
right to purchase, on the terms and subject to the conditions set forth in the Series II Warrants, 3,342,566 shares of Common Stock at an exercise price of $0.01 per share (collectively, the “Securities”), for an aggregate purchase price of $300,000,000 net of an amount equal to $9,000,000 (representing 3.0% of the Subscriber’s purchase price for the Securities).
The closing of the subscription contemplated by the Subscription Agreement is conditioned upon:
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the consummation of the spin-off transaction, whereby, among other things, (i) FTAI Infrastructure will be converted into a Delaware corporation, (ii) FTAI
Infrastructure’s name will be changed to “FTAI Infrastructure Inc.”, (iii) the board of directors of the Company will declare the distribution of all the shares of Common Stock owned by the Company, such that each shareholder of the Company
holding a common share of the Company (“Company Common Shareholders”) will receive one share of Common Stock for each common share of the Company held
by such Company Common Shareholders, and (iv) upon the distribution, Company Common Shareholders will own substantially all of the Common Stock (collectively, the “Spin-Off”);
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solely with respect to the Subscriber, FTAI Infrastructure or its subsidiary having issued at least $450,000,000 and not more than $500,000,000 aggregate principal
amount of FTAI Infrastructure’s senior secured notes due 2027 (the “Notes”) prior to, or substantially concurrent with, the Spin-Off, in all material respects in accordance with the terms of the draft description of notes
provided to the Subscriber; and
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other customary closing conditions set forth in the Subscription Agreement.
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The closing of the subscription contemplated by the Subscription Agreement is expected to occur contemporaneously with the consummation of the Spin-Off.
FTAI Infrastructure will distribute the net proceeds from the subscription contemplated by the Subscription Agreement to the Company in connection with the
Spin-Off. The Subscription Agreement contains customary representations, warranties and covenants of FTAI Infrastructure and the Subscriber.
The Subscription Agreement will terminate on the earlier to occur of (a) the mutual written agreement of each of the parties to the Subscription Agreement,
(b) FTAI Infrastructure’s notification to the Subscriber in writing that it or the Company has abandoned its plans to move forward with the Spin-Off or (c) at the election of the Subscriber, if the Closing has not occurred by August 30, 2022 (the “Outside Date”). If any termination of the Subscription Agreement has occurred, Transtar and FTAI Infrastructure, jointly and severally, will be required to pay to
the Subscriber the amount of $9,000,000 (the “Commitment Fee”). However, neither FTAI Infrastructure nor Transtar will be obligated to pay such Commitment Fee
if a material breach by the Subscriber of its obligation under the Subscription Agreement is the primary cause of the failure to close on or prior to the Outside Date.
Pursuant to the Subscription Agreement, Transtar and FTAI Infrastructure, jointly and severally, agreed to reimburse the Subscriber for any reasonably
incurred and documented out-of-pocket expenses that are incurred in connection with the Subscription Agreement and the transactions contemplated thereby in an amount not to exceed $2,250,000. Additionally, pursuant to the Subscription Agreement, FTAI
Infrastructure granted the Subscriber a right to buy up to $166,500,000 of the Notes.
The description of the terms of the offering of the Securities is qualified in its entirety by reference to the Subscription Agreement, which is filed as
Exhibit 10.1 hereto.
Certificate of Designations for the Series A Preferred Stock
Pursuant to the certificate of designations for the Series A Preferred Stock (the “Certificate of Designations”), the Series A Preferred Stock will rank senior to the Common Stock and all other junior equity securities of FTAI Infrastructure, and junior to FTAI Infrastructure’s existing or future
indebtedness and other liabilities (including trade payables) of FTAI Infrastructure, with respect to payment of dividends, distribution of assets and all other liquidation, winding up, dissolution, dividend and redemption rights. In addition, the
Series A Preferred Stock will have the following terms:
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Dividends: Dividends on the Series A Preferred Stock will be
payable at a rate equal to 14.0% per annum subject to increase in accordance with the terms of the Series A Preferred Stock. Specifically, the rate would be increased by 2.0% per annum for any periods during the first two years following
closing where the dividend is not paid in cash. Prior to the second anniversary of the issuance date of the Series A Preferred Stock, such dividends will automatically accrue and accumulate on each share of Series A Preferred Stock, whether
or not declared and paid, or they may be paid in cash at FTAI Infrastructure’s discretion. After the second anniversary of the issuance date of the Series A Preferred Stock, FTAI Infrastructure is required to pay such dividends in cash.
Failure to pay such dividends would result in a dividend rate equal to 18.0% per annum, subject to increase as described below, and a failure to pay cash dividends for 12 monthly dividend periods (whether or not consecutive) following the
second anniversary of the issuance date would constitute an Event of Noncompliance (as defined in the Certificate of Designations). The dividend rate on the Series A Preferred Stock will increase by 1.0% per annum beginning on the fifth
anniversary of the issuance date of the Series A Preferred Stock.
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Events of Noncompliance: If FTAI Infrastructure fails to cure an
Event of Noncompliance (to the extent curable), (i) the size of FTAI Infrastructure’s board of directors will automatically increase to a number sufficient to constitute a majority of the board of directors, (ii) the majority of the holders
of the Series A Preferred Stock will have the right to designate and elect a majority of the members of FTAI Infrastructure’s board of directors, and (iii) other than with respect to the election of directors, the shares of Series A Preferred
Stock will vote with the Common Stock as a single class (with the number of votes per share determined in accordance with the Certificate of Designations).
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Mandatory Redemption: The Series A Preferred Stock will not be
mandatorily redeemable at the option of the holders of the Series A Preferred Stock, except upon the occurrence of certain Events of Noncompliance or a change of control (each a “Mandatory Redemption Event”). Upon the occurrence of a Mandatory Redemption Event, to the extent not prohibited by law, FTAI Infrastructure will be required to redeem all Series A Preferred Stock in cash at a
redemption price per share determined in accordance with the Certificate of Designations.
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Negative Covenants: The Certificate of Designations also
contains negative covenants limiting certain activities of FTAI Infrastructure and certain of its subsidiaries. These covenants, among other things, limit FTAI Infrastructure’s and certain of its subsidiaries’ ability to (i) incur
indebtedness, (ii) issue equity interests of FTAI Infrastructure ranking pari passu with, or senior in priority to, the Series A
Preferred Stock, (iii) issue equity interests of any subsidiary of FTAI Infrastructure, (iv) amend or repeal the certificate of incorporation or bylaws in a manner that is adverse to the holders of the Series A Preferred Stock, (v) pay
dividends or make other distributions, (vi) create liens, (vii) incur dividend or other payment restrictions affecting FTAI Infrastructure and certain of its subsidiaries, (viii) undertake certain prohibited actions with respect to FTAI
Infrastructure’s management agreement with FIG LLC (the “Manager”), (ix) transfer or sell assets, including capital stock of subsidiaries, (x) consummate a change of control without concurrently redeeming the shares of
Series A Preferred Stock, (xi) enter into transactions with affiliates, (xii) engage in certain prohibited business activities, (xiii) engage in certain intercompany transactions, and (xiv) take actions to cause FTAI Infrastructure to cease
to be treated as a domestic C corporation for U.S. tax purposes.
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The description of the terms of the Certificate of Designations is qualified in its entirety by reference to the Certificate of Designations, which is
filed as Exhibit 3.1 hereto.
Investors’ Rights Agreement
In connection with the issuance of the Series A Preferred Stock, FTAI Infrastructure will enter into an Investors’ Rights Agreement (the “Investors’ Rights Agreement”) with the Investors (as defined in the Investors’ Rights Agreement). The Investors’ Rights Agreement sets forth the Investors’ right
to receive certain quarterly and annual financial and other information of FTAI Infrastructure. The Investors’ Rights Agreement also sets forth a standstill covenant by the Investors, restrictions on transfer of shares of Series A Preferred Stock by
the Investors, “Key Person” and “Manager Event” consultation rights in favor of the Investors, registration rights in favor of the Investors, and rights of first offer in favor of the Investors with respect to future issuances of preferred equity of
FTAI Infrastructure, in the case of Subscriber and its affiliates, and debt for borrowed money of FTAI Infrastructure, in the case of Subscriber and its affiliates, and certain intermediate holdings companies.
The description of the terms of the Investors’ Rights Agreement is qualified in its entirety by reference to the Investors’ Rights Agreement, which is
filed as Exhibit 10.2 hereto.
Warrant Agreement
Upon the consummation of the Spin-Off and in connection with the offering of the Series A Preferred Stock, FTAI Infrastructure will have outstanding (i)
Series I Warrants entitling the holders thereof to purchase 3,342,566 shares of Common Stock, exercisable until the earlier of (A) the eight-year anniversary of their issuance or (B) a sale of FTAI Infrastructure (the “Expiration Time”); and (ii) Series II Warrants entitling holders thereof to purchase 3,342,566 shares of Common Stock, exercisable until the Expiration Time. Such number of shares of
common stock purchasable pursuant to the Warrants (the “Warrant Shares”) may be adjusted from time to time to account for stock splits, dividends and similar
items and, in the case of the Series I Warrants, for below-market issuances of common equity. The Series II Warrants will participate on an as-converted basis in any dividends with respect to the Common Stock. The Warrants will expire at the
Expiration Time.
The description of the terms of the Warrants is qualified in its entirety by reference to the Warrant Agreement, which is filed as Exhibit 10.3 hereto.
Manager Option
Upon the successful completion of the offering of Series A Preferred Stock, FTAI Infrastructure expects to pay and issue to the Manager options to purchase FTAI Infrastructure’s Common Stock in an amount equal to 10%
of the gross capital raised in the offering of Series A Preferred Stock.
Disclaimer
The Subscription Agreement, Investors’ Rights Agreement, Certificate of Designations, and Warrant Agreement are filed to provide the Company and FTAI
Infrastructure’s investors and stockholders with information regarding their terms. They are not intended to provide any other factual information about the Company, FTAI Infrastructure, the Subscriber or their respective subsidiaries and affiliates.
The Subscription Agreement contains representations and warranties by FTAI Infrastructure made solely for the benefit of the Subscriber. Certain representations and warranties in the Subscription Agreement were made as of a specified date, may be
subject to a contractual standard of materiality different from what might be viewed as material to investors or stockholders, or may have been used for the purpose of allocating risk between the Subscriber and FTAI Infrastructure. Accordingly, the
representations and warranties in the Subscription Agreement should not be relied on by any persons as characterizations of the actual state of facts about FTAI Infrastructure at the time they were made or otherwise. In addition, information
concerning the subject matter of the representations and warranties may change after the date of the Subscription Agreement, which subsequent information may or may not be fully reflected in the Company's and FTAI Infrastructure’s public disclosures.
