| Item 1.01 | Entry into a Material Definitive Agreement |
On April 15, 2022, Opportunity Financial, LLC (“OppFi-LLC”), a Delaware limited liability company and subsidiary of OppFi, Inc., a Delaware corporation (the “Company”), entered into total return swaps (the “TRS”) with affiliates of Midtown Madison Management (collectively, “Midtown”) pursuant to which OppFi-LLC agreed to provide credit protection related to a reference pool of consumer receivables financed by Midtown through a $75 million revolving credit agreement (the “Credit Agreement”) with Midtown as lender and Gray Rock SPV V, LLC as borrower (“Borrower”). Pursuant to the TRS, Opp-Fi LLC will receive payments received by the Midtown reference lenders under the Credit Agreement. OppFi-LLC also entered into a servicing agreement to service the consumer receivables financed through the Credit Agreement (the “Servicing Agreement”).
The TRS is designed to enable OppFi-LLC to obtain the economic benefit of owning interests in the consumer receivables financed with loans made under the Credit Agreement (the “Loans”), without actually owning such receivables, in return for OppFi-LLC paying interest and principal losses on the Loans to Midtown. OppFi-LLC incurs the risk that certain Borrower defaults under the Credit Agreement may result in acceleration of the Loans, termination of Midtown’s commitments to make additional Loans and the obligation of OppFi-LLC to pay default interest under the TRS.
The TRS will terminate on the earliest of (i) repayment in full of the Loans after the April 2024 revolving commitment termination date under the Credit Agreement, (ii) assignment of the Loans to OppFi-LLC and (iii) the April 2025 final maturity date set forth in the Credit Agreement. On or prior to such final maturity date, Midtown is required to cause the reference lenders to assign their right, title and interest under the Credit Agreement to OppFi-LLC.
The TRS contains customary events of default and termination events for a TRS, including failure to make payments under the TRS when due, cross default, misrepresentation, breach of agreement, bankruptcy, illegality and force majeure. In addition, OppFi-LLC is subject to an additional termination event if OppFi-LLC defaults as servicer under the Servicing Agreement. If an event of default occurs with respect to OppFi-LLC, or if certain termination events occur, Midtown will have the right to early terminate the TRS and OppFi-LLC will be required to make certain make-whole payments to, or receive certain shortfall payments from, Midtown.
The foregoing description of the TRS is not complete and is qualified by reference to the full text of the form of TRS, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
To the extent applicable, the information in Item 1.01 of this report is incorporated by reference into this Item 2.03.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit Index
