Diving certificate:

• Digital waste trading company Rubicon reached an agreement with lenders in May to advance a sale of the company, according to the latest release of its quarterly results.
• The company has been given 300 days to complete the sale of all or most of its assets and repay its debt. The agreement was reached in connection with the sale of Rubicon’s software-as-a-service business to a company backed by two of its major investors.
• Rubicon used the proceeds from the latter deal, which it announced on May 7, to pay down some of its debt. A Rubicon spokesman did not respond to a request for comment on the tender offer.

Diving insight:

Rubicon accepted the deal for its software-as-a-service business to stabilize the publicly traded company FinanceThe company’s shares were delisted from the New York Stock Exchange in June and the company’s management team was restructured this year.

In February, Chief Operating Officer Renaud de Viel Castel left the company amid a major layoff. Rubicon’s President and CFO Kevin Schubert resigned effective June 1. CEO Phil Rodoni resigned the same month.

The company is now led by interim CEO Osman Ahmed, who was previously CEO of the special purpose acquisition company that merged with Rubicon to take the company public in 2022. Following that transaction, Ahmed served as lead independent director on the company’s board of directors.

Ahmed began serving as interim CEO on June 27 with a base salary of $500,000. He is eligible to receive a transaction bonus of $500,000 if the company is sold, recapitalized or otherwise involved in a transaction for all of its assets within one year of his assuming office.

The deal for Rubicon’s software business brought the company $61.7 million in cash. It also included a transaction in which investor Jose Miguel Enrich acquired $20 million worth of the company’s stock, increasing his stake to 59.5 percent of the company. The deal also included additional payouts dependent on the software business’s performance for the rest of the year, as well as an additional $2.5 million payout if Rubicon agrees to sell to a company jointly controlled by Enrich and Andres Chico, another major investor.

Rubicon used the total proceeds from this transaction, which amount to approximately $81.7 million, to pay down its debt, including $57 million to pay down the remaining balances of a June 2023 term loan that expires next year and a revolving credit facility that expires in June 2023. The latter gave Rubicon access to $90 million in capital, but only about $200,000 was available in the second quarter.

When Rubicon completed the sale of its software business, it also reached an agreement with its lenders to sell “all or substantially all” of the company’s assets within 300 days of May 7. This agreement includes two milestones: Rubicon must provide a notice of intent to sell within four months and complete the sale and fully repay all debt within 10 months.

Enrich had already offered to buy Rubicon in a takeover bid in March, when the company reported progress on its profitability plan but was still negotiating to maintain its position on the New York Stock Exchange. The sale of the company’s software business came about two months after that offer was announced.

The sale of Rubicon’s software business helped improve the company’s finances in the second quarter, according to an earnings release. Rubicon reported a 5.1% decline in revenue to $163.1 million and a 54.6% drop in gross profit to $4.5 million. However, the company’s net income – $27.3 million – rose 219% compared to the second quarter last year.

“We are thrilled with our second quarter performance, where our team’s relentless focus on customer success and strategic account management paid off,” Ahmed said in a press release. “By winning new customers and unlocking upselling opportunities within our existing base, we demonstrated that when our partners win, we win. We look forward to building on this momentum and achieving even greater success in the future.”

The company said it was uncertain whether it could meet its financial needs for the next 12 months – it had $8.2 million in cash on hand as of June 30. Rubicon said it focused on operational efficiencies and cost reductions during the quarter. It also won several new customers, including The Army & Airforce Exchange Service, Fortune Brands, TK Elevators and the Veterinary Emergency Group, and renewed its contract with “a leading wholesaler.” at more than 1,800 locations by 2027, according to the press release.

The company has not scheduled a conference call on earnings for the second quarter.