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Novation Companies, Inc. Executes First Amendment to Senior Secured Note Purchase Agreement

KANSAS CITY, Mo., Aug. 09, 2019 (GLOBE NEWSWIRE) -- Novation Companies, Inc. (NOVC) ("Novation" or the "Company"), which through its subsidiary Healthcare Staffing, Inc. provides outsourced health care staffing and related services in the State of Georgia, is announcing an amendment to its Senior Secured Note Purchasing Agreement dated July 27, 2017 and related senior notes.

On August 9, 2019, Novation executed a First Amendment to Senior Secured Note Purchase Agreement amending the terms of the purchase agreement and related senior notes.  The key terms of the amendment are as follows:

  • For the period from April 1, 2019 through December 31, 2023, Novation will pay an interest rate of 1% per annum on the principal balance outstanding under the senior notes, with interest payable quarterly.
  • For the period from January 1, 2024 through December 31, 2028, Novation will pay an interest rate of 2% per annum on the principal balance outstanding under the senior notes, with interest payable quarterly.
  • For the period from January 1, 2029 through the later of the maturity date or until the loan is paid in full, Novation will pay an interest rate of 10% per annum on the principal balance outstanding under the senior notes, with interest payable quarterly.
  • On April 1, 2019 and on July 1, 2019, Novation made payments under the senior notes totaling $2.7 million.  The actual aggregate amounts due under the amended senior notes on those dates totaled $0.4 million.  Therefore, Novation paid a total surplus of $2.2 million on those dates.
  • Under the terms of the amendment, this payment surplus will be credited towards Novation’s future quarterly interest payment obligations under the senior notes, such that at the new interest rate Novation will not be required to pay additional interest under the senior notes until the quarterly period commencing April 1, 2022, when the surplus will be exhausted leaving interest payments for that quarter totaling $0.2 million.
  • Under the amendment, Novation will issue to holders of the senior notes a total of 9 million shares of common stock, as well as 10-year warrants to purchase a total of 22.3 million shares of common stock at an exercise price of $0.01 per share.
  • Additionally, Novation agreed under the amendment to direct 50% of each year’s excess cash flow (beginning with the fiscal year ending December 31, 2019) toward principal reduction on the outstanding debt balance under the senior notes.
  • The Company had $85.9 million of unpaid principal amount outstanding under the senior notes as of June 30, 2019.
  • Lastly, under the amendment, the financial covenants under the purchase agreement will not apply until the period ending December 31, 2021.

The amendment will be described in additional detail, and the full text of the amendment will be filed as an exhibit to, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 to be filed with the Securities and Exchange Commission.

David Pointer, the Company’s Chief Executive Officer and Chairman of the Board, stated, “We are very pleased to announce this development.  We welcome our senior noteholders’ involvement in Novation as equity investors and appreciate their willingness to amend our structured payment schedule with them.”

Novation Companies Inc. trades on the OTC Markets’ Group inter-dealer quotation service as an OTCQB security under the symbol NOVC.  For more information, please visit www.novationcompanies.com or contact David Pointer, Chief Executive Officer, at dave.pointer@novationcompanies.com.