United States securities and exchange commission logo
October 27, 2021
Mohsin Y. Meghji
Chairman and Chief Executive Officer
M3-Brigade Acquisition II Corp.
1700 Broadway, 19th Floor
New York, NY 10019
Re: M3-Brigade
Acquisition II Corp.
Preliminary Proxy
Statement on Schedule 14A
Filed September 27,
2021
File No. 001-40162
Dear Mr. Meghji:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Preliminary Proxy Statement filed September 27, 2021
Summary Term Sheet, page 1
1. Please provide here or
in another section in the forepart of the proxy statement a succinct
and plain English
overview of the business combination and related transactions. For
example, clarify that
you have entered into a business combination to acquire Syniverse
and that as part of the
business combination Twilio is making an up to $750 million equity
investment with a
minimum commitment of $500 million, you are receiving another $265
million in a PIPE
investment of common stock and convertible preferred stock and you
will use proceeds from
the business combination to refinance your debt. Disclose the
value of the
consideration being paid to Syniverse, the approximate number of shares you
are issuing as
consideration and the number of shares and convertible preferred stock you
are issuing pursuant to
the related transactions.
Mohsin Y. Meghji
M3-Brigade Acquisition II Corp.
October 27, 2021
Page 2
Questions and Answers about the Proposals for Stockholders
Q: What equity stake will current stockholders of the Company...hold in the
post-combination
company after the Closing?, page 17
2. Please revise your narrative and tabular disclosures throughout to
show the potential
impact of interim levels of redemptions. If the maximum redemption
scenario does not
assume the redemption of all of the public shares, explain why and
disclose the number
and percentage of shares that the maximum redemption scenario assumes
are redeemed.
3. Please revise to disclose that the post-business combination company
will be a "controlled
company" under the rules of the New York Stock Exchange.
Cross-reference to a more
detailed discussion of the implications of the post-business
combination company s status
as a "controlled company."
Q: What vote is required to approve the proposals presented at the Special
Meeting?, page 20
4. Please disclose that the Sponsor Parties have agreed to vote their
MBAC shares in favor of
the Business Combination and quantify the number and percentage of
MBAC shares this
represents. In addition, disclose the percentage of the remaining
shares that are needed to
approve the Business Combination Proposal assuming all MBAC
outstanding shares are
voted and assuming only a quorum of MBAC shares are voted.
Q: What interests do the Sponsor and the Company s current officers and
directors have in the
Business Combination?, page 23
5. Please clarify if the Sponsor and its affiliates can earn a positive
rate of return on their
investment, even if other M3-Brigade shareholders experience a
negative rate of return in
the post-business combination company.
6. Please expand your disclosure to further quantify the aggregate dollar
amount of what
MBAC's Sponsor, officers and directors and their affiliates have at risk
that depends on
completion of a business combination. For example, please quantify the
following:
Disclose the value of the Sponsor's MBAC shares and warrants based
on the
transaction value and recent trading prices as compared to the price
paid;
Disclose any consideration provided in exchange for the Sponsor
agreeing to waive
its redemption rights;
Disclose the amount of investment by MBAC's Sponsor, officers and
directors and
their affiliates that will be lost as a result of waiving
liquidating distributions;
FirstName
LastNameMohsin
Disclose the amount Y. of
Meghji
Syniverse debt and interest held by
Brigade that will be
Comapany repaid
NameM3-Brigade
in connection Acquisition II Corp.Syniverse's debt upon
consummation of the
with refinancing
October 27,business
2021 Page combination
2 transactions.
FirstName LastName
Mohsin Y. Meghji
FirstName
M3-BrigadeLastNameMohsin Y. Meghji
Acquisition II Corp.
Comapany
October 27,NameM3-Brigade
2021 Acquisition II Corp.
October
Page 3 27, 2021 Page 3
FirstName LastName
Q: If am a holder of Company public shares, can I exercise redemption rights
with respect to my
public shares?, page 26
7. Quantify the value of warrants, based on recent trading prices, that
may be retained by
redeeming stockholders assuming maximum redemptions and identify any
material
resulting risks.
Q: How do I exercise my redemption rights?, page 27
8. Please describe the threshold price that would allow the company to
redeem public
warrants and clarify whether recent common stock trading prices exceed
that threshold.
Clearly explain the steps, if any, the company will take to notify all
shareholders,
including beneficial owners, regarding when the warrants become
eligible for redemption.
Risk Factors, page 68
9. Disclose the material risks to unaffiliated investors presented by
taking the company
public through a merger rather than an underwritten offering. These
risks could include
the absence of due diligence conducted by an underwriter that would be
subject to liability
for any material misstatements or omissions in a registration
statement.
10. Please highlight the risk that the Sponsor will benefit from the
completion of a business
combination and may be incentivized to complete an acquisition of a
less favorable target
company or on terms less favorable to shareholders rather than
liquidate.
11. Please include a risk factor addressing the risks to shareholders of
the exclusive forum
provisions in the post-combination company's charter, including that a
court will find the
Securities Act exclusive forum provision to be unenforceable.
Breaches in data security and lapses in data privacy, as well as disruptions
and other damages to
Syniverse's information technology..., page 69
12. We note that in May 2021, Syniverse became aware of unauthorized
access to its
operational and information technology systems by an unknown
individual or
organization (the May 2021 Incident ). We further note that
Syniverse launched an
internal investigation, notified law enforcement, commenced remedial
actions and
engaged the services of specialized legal counsel and other incident
response
professionals, and believes it has identified and adequately
remediated the vulnerabilities
that led to the incidents. Please revise to clarify whether your
investigation of the May
2021 Incident still continues, and describe in greater detail the
scope and any potential
impact of the incident to your systems, solutions and customers. Tell
us how you
evaluated and assessed any contingent liabilities due to potential
damages to your
customers. We refer you to ASC 450-20-55-14. Disclose any remediation
efforts and
steps you have taken or expect to take to support and protect your
customers. Indicate
when your customers were notified of any impact to them and whether
any
indemnification clauses have be activated. Revise to disclose the
amount of cyber
Mohsin Y. Meghji
M3-Brigade Acquisition II Corp.
October 27, 2021
Page 4
insurance that Syniverse has maintained and currently maintains.
Disclose the costs
or expenditures incurred in investigating and responding to this
incident. In addition, you
should include similar discloses in the MD&A section of your filing.
Syniverse depends on a small number of customers..., page 71
13. Please disclose the material terms of your agreement with AT&T
Mobility, including the
term and any termination provisions.
If Syniverse fails to maintain effective internal controls over financial
reporting at a reasonable
assurance level..., page 83
14. Please explain in detail how you considered the May 2021 Incident and
the investigation
in your assessment of disclosure controls and procedures and internal
control over
financial reporting. Tell us whether you identified any significant
deficiencies or material
weaknesses in your internal control over financial reporting. Describe
whether there have
been any changes to your internal control over financial reporting
that occurred
subsequent to your fiscal year end that have materially affected, or
are reasonably likely to
materially affect, your internal controls. We refer you to SEC
Interpretive Release No. 33-
10459.
Syniverse has substantial debt..., page 84
15. Please quantify Syniverse s debt service requirements and disclose
the percentage of its
cash flow that must be dedicated to debt service, both principal and
interest.
Our public stockholders will experience dilution..., page 91
16. Please revise to disclose all possible sources and extent of dilution
that shareholders who
elect not to redeem their shares may experience in connection with the
business
combination. Provide disclosure of the impact of each significant
source of dilution,
including the amount of equity held by founders, convertible
securities, including warrants
retained by redeeming shareholders and the conversion of the
convertible preferred notes,
at each of the redemption levels detailed in your tabular
presentation, including any
needed assumptions.
We and Syniverse will incur significant transaction and transition costs in
connection with the
Business Combination, page 95
FirstName LastNameMohsin Y. Meghji
17. We note that underwriting fees remain constant and are not adjusted
based on
Comapany NameM3-Brigade
redemptions. Acquisition
Revise your disclosureIItoCorp.
disclose the effective
underwriting fee on a
Octoberpercentage basis4for shares at each redemption level presented.
27, 2021 Page
FirstName LastName
Mohsin Y. Meghji
FirstName
M3-BrigadeLastNameMohsin Y. Meghji
Acquisition II Corp.
Comapany
October 27,NameM3-Brigade
2021 Acquisition II Corp.
October
Page 5 27, 2021 Page 5
FirstName LastName
Unaudited Pro Forma Condensed Combined Financial Information, page 111
18. Please explain why you did not include any disclosure in your pro
forma financial
statements for the estimated costs of the investigation subsequent to
May 31, 2021 or
other costs you expect to incur in connection with the May 2021
Incident. Please clarify
your disclosures if you are unable to estimate other costs you expect
to incur.
19. We note that Carlyle held $68.9 million and $62.4 million of the
Tranche C Term Loans
as of May 31, 2021 and November 30, 2020. We also note that Brigade is
a significant
lender to Syniverse and will receive proceeds in the transaction from
the refinancing of
Syniverse s outstanding indebtedness upon consummation of the
Business
Combination. Please revise to separately present related party debt on
the face of your
unaudited pro forma condensed combined balance sheet. In addition,
revise your
disclosures in Adjustment (F) to clarify whether Carlyle or Brigade
will receive any
proceeds in connection with the payoff of Syniverse s existing debt.
We refer you to Rule
4-08(k) of Regulation S-X.
20. We note that Twilio is currently a customer of the post-combination
company s enterprise
messaging services. Please tell us your consideration of separately
disclosing the amount
of related party revenues and expenses for Twilio.
Proposal No. 1 - The Business Combination Proposal
Registration Rights Agreement, page 158
21. Please disclose the length of the lock-up period in the registration
rights agreement.
Background of the Business Combination, page 167
22. Please discuss if the Sponsor has other SPACs in the process of
searching for a target
company, whether the Sponsor considered more than one active SPAC to
be the potential
acquirer and how the final decision was reached.
23. Your charter waived the corporate opportunities doctrine. Please
address whether this
potential conflict of interest impacted your search for an acquisition
target.
24. Please disclose when the Syniverse projected financial information was
presented to the
board and any discussions relating to the assumptions underlying the
target projections. In
this regard, we note your disclosure on page 179 that the projections
were presented on
May 21, 2021.
25. We note your disclosure on page 175 that Mr. Vincent recused
himself from certain
discussions concerning the Business Combination on account of his
relationship with
Brigade. Please identify these discussions in the description of
the transaction timeline.
Mohsin Y. Meghji
FirstName
M3-BrigadeLastNameMohsin Y. Meghji
Acquisition II Corp.
Comapany
October 27,NameM3-Brigade
2021 Acquisition II Corp.
October
Page 6 27, 2021 Page 6
FirstName LastName
The Company's Board of Directors' Reasons for the Approval of the Business
Combination, page
176
26. Please discuss how the MBAC Board determined the $2.85 billion
enterprise value of
Syniverse. As part of the discussion, disclose the Board's analysis of
selected other
companies and the valuations implied by the Twilio Investment and PIPE
Investment,
which are referenced under "Valuation and Financial Profile" on page
176.
Certain Syniverse Projected Financial Information, page 179
27. Please revise to disclose in greater detail the basis for and the
nature of the material
assumptions underlying the projections. For example, explain in more
detail the basis for
determining your revenue growth in each segment through 2025. Provide
estimated
revenue for both fixed and variable consideration and the underlying
assumptions and
inputs for each of these revenue line items that supports your
estimates. In addition,
explain how you estimated variable costs, direct costs and expenses
through 2025.
28. You disclose that the Twilio Investment and Twilio s proposed
strategic partnership with
Syniverse will create a catalyst for accelerated revenue and earnings
growth for
Syniverse. Please revise your projections to separately present
related party revenues and
costs associated with Twilio s proposed strategic partnership with
Syniverse. This
appears to be important information necessary to understanding your
projections.
29. You disclose that the projections do not take into account any
circumstances or events
occurring after the date on which the Projections were presented to
the Board, which was
May 21, 2021, and speak only as of such date. Please explain whether
your projections
take into account the May 2021 Incident.
Proposal No. 2 - Thr NYSE Proposal, page 194
30. Please clarify whether the NYSE requires separate shareholder votes
for each proposed
issuance of securities that, on its own, would require shareholder
approval
under Section 312.03 of the NYSE s Listed Company Manual.
Proposal No. 3 - The Charter Proposal, page 197
31. Please explain to us the legal basis for presenting a binding proposal
to approve two
alternative charters. In addition, provide more disclosure in the
Questions and Answers
section regarding the reason for presenting alternative charters,
under what circumstances
Class C common stock will be issued and the material difference
between the Class A and
Class C common stock.
Proposal No. 4 - The Governance Proposal, page 202
32. Please balance your disclosure regarding each governance proposal by
including a
discussion of the disadvantages to shareholders of the proposal.
Mohsin Y. Meghji
FirstName
M3-BrigadeLastNameMohsin Y. Meghji
Acquisition II Corp.
Comapany
October 27,NameM3-Brigade
2021 Acquisition II Corp.
October
Page 7 27, 2021 Page 7
FirstName LastName
Syniverse's Management's Discussion and Analysis of Financial Condition and
Results of
Operations
Liquidity and Capital Resources, page 271
33. We note that Syniverse believes that it has sufficient liquidity to
meet its currently
anticipated business needs, including planned capital expenditures and
working capital
requirements due to cash on hand, expected cash flows from operations
and availability
under the New Revolving Credit Facility. Please revise to disclose
your ability to generate
and obtain adequate amounts of cash to meet your requirements and your
plans for cash in
the short-term based upon your currently available resources. We refer
you to Item 303(b)
of Regulation S-K.
Non-GAAP Financial Measures
Reconciliation of Non-GAAP Measures to GAAP, page 275
34. Please clarify why certain adjustments to your Non-GAAP Adjusted
EBIDTA measures
are proper. In this respect, we note that adjustment (c) reflects
items associated with
certain advisory and professional services related to strategic
initiatives and otherwise,
employee costs and data center migration costs. We refer you to
Question 100.01 of
the Non-GAAP Compliance & Disclosure Interpretations. Please provide
an analysis of
each item included in adjustment (c) to support that such expenses are
not normal,
recurring, cash operating expenses necessary to operate your business.
Critical Accounting Policies
Goodwill, page 277
35. We note that beginning in fiscal quarter ended May 31, 2021,
management concluded that
Syniverse was comprised of two reporting units that appear to be your
reportable
operating segments. Please revise to disclose here and in your
financial statement
footnotes the amount of goodwill allocated to each reportable
operating segment in
accordance with ASC 350-20-50-1.
Common Stock Valuation, page 279
36. When your preliminary IPO price or valuation is known, please provide
us with a
breakdown of all equity awards granted from six month before the date
of this letter and
leading up to the preliminary pricing of your transaction. This
breakdown should list
grants in chronological order including the fair value of the
underlying common stock
used to value such awards as determined by your board of directors.
Please reconcile and
explain the differences between the fair values of the underlying
equity interest
determined on each grant date, including the difference between the
most recent grant date
fair value and the midpoint of your offering range. Your disclosure
should fully describe
the assumptions utilized at the IPO valuation date that are
significantly different than
those used in the most recent valuation.
Mohsin Y. Meghji
FirstName
M3-BrigadeLastNameMohsin Y. Meghji
Acquisition II Corp.
Comapany
October 27,NameM3-Brigade
2021 Acquisition II Corp.
October
Page 8 27, 2021 Page 8
FirstName LastName
Beneficial Ownership of Securities, page 317
37. Please separately disclose the Sponsor and its affiliates' total
potential ownership interest
in the combined company, assuming exercise and conversion of all
securities.
38. Please disclose the natural person or persons who exercise the voting
and/or dispositive
powers with respect to the securities owned by Carlyle Partners V
Holdings, L.P. and
Brigade Capital Management, LP.
Consolidated Financial Information of Syniverse
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page G-29
39. You disclose certain contracts with monthly recurring fees which are
fixed over the course
of each year under the contract, but may change at the completion of
each twelve month
period of the contract. Explain the judgment management applies to
determine whether a
time-based measure or another output-based measure, such as volume, is
the most
appropriate measure of the pattern of performance to satisfy the
performance obligation.
Explain whether the change at completion represents variable
consideration.
40. We note that for contracts with significant up-front customization and
development
activities at inception of a contract, revenues and the associated
direct costs, if any, are
deferred and recognized on a straight-line basis over the contractual
term. Please describe
in detail the nature of the up-front customization and development
activities at inception
of a contract. Provide us with your analysis and tell us the specific
accounting guidance
that you are relying upon to recognize the revenues and associated
direct costs. Explain
how you determine the contractual term and how you consider contract
renewals. We
refer you ASC 606-10-55-50 through 53.
41. Please explain in greater detail how you recognize revenues for those
contacts that
include a tier-based price per unit or fee, or a fixed amount plus
additional fees for volume
overages above a contractual threshold. Describe any estimates and
assumptions that you
consider for these arrangements.
42. You disclose that revenues are recognized when control of the promised
services is
transferred to its customers in an amount that reflects the
consideration Syniverse expects
to be entitled to in exchange for those services. You further disclose
that cost of
operations includes variable costs, which are partially composed of
message termination
fees, revenue share fees and data processing costs, and variable costs
are paid to third-
party providers and are direct costs that fluctuate either as a
percentage of revenue or by
the number of transactions processed. Please clarify the nature of the
goods and services
for which you recognize revenue on a gross basis and those for which
you recognize
revenue on a net basis. Provide us with a comprehensive analysis
regarding how you
concluded you were the principal or agent in the related arrangements.
We you refer to
ASC 606-10-50-12(c) and ASC 606-10-55-36 through 55-40.
Mohsin Y. Meghji
M3-Brigade Acquisition II Corp.
October 27, 2021
Page 9
Note 4. Revenues, page G-40
43. We note that you operate in several different countries or regions
outside the United
States. Please explain how you considered the guidance in ASC
280-10-50-41(a)
44. You disclose that the transaction price of each contract includes the
amount to which it
expects to be entitled, which is comprised of fixed consideration,
variable consideration or
a combination of both. Please tell us how you considered providing
disaggregated revenue
disclosures by type of contract (i.e. fixed and variable). Also consider
disclosing revenue
amounts that you recognize straight-line for fixed monthly recurring fees
over the contract
term, transaction-based fees that are invoiced each month, and services
with transaction-
based fees. We refer you to ASC 606-10-55-89 through 55-91.
19. Reportable Segments, page G-57
45. Please revise to provide the disclosures required by ASC 280-10-50-21 and
55-47.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Morgan Youngwood, Senior Staff Accountant, at
202-551-3479 or
Stephen Krikorian, Accounting Branch Chief, at 202-551-3488 if you have
questions regarding
comments on the financial statements and related matters. Please contact Anna
Abramson, Staff
Attorney, at 202-551-4969 or Kathleen Krebs, Special Counsel, at 202-551-3350
with any other
questions.
Sincerely,
FirstName LastNameMohsin Y. Meghji
Division of
Corporation Finance
Comapany NameM3-Brigade Acquisition II Corp.
Office of
Technology
October 27, 2021 Page 9
cc: John L. Robinson, Esq.
FirstName LastName