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Score Media and Gaming Inc. (TSX Venture: SCR) (“theScore” or the “Company”) is pleased to announce that it has entered into an investment agreement with a fund managed and controlled by Fengate Asset Management (“Fengate”). Through the firm’s private equity team, Fengate will invest $40,000,000 in theScore to fund the growth and development of the Company’s media and sports betting businesses.

Under the terms of the agreement, Fengate will purchase a $40,000,000 8.00% convertible unsecured subordinated debenture of the Company, due August 31, 2024. The private placement of the debenture is expected to close on or about September 5, 2019, and is subject to certain conditions, including receipt of the approval of the TSX Venture Exchange.

“theScore is focused on becoming a leader in mobile sports gaming in North America and this strategic investment significantly enhances our ability to execute on this plan,” said John Levy, Founder and CEO of theScore. “Fengate is recognized as a highly respected and experienced investor across North America, with significant expertise in the gaming industry. They are the perfect strategic investment partner as we launch our best-in-class mobile sportsbook in the United States.”

Justin Catalano, Managing Director and Group Head, Private Equity, Fengate, said, “We are excited by the opportunity to be partnering with theScore and its entrepreneurial management team. theScore’s unique ability to integrate sports betting into their industry-leading mobile sports media platform makes this investment a strong addition to our growing private equity platform investing across North America.”

Transaction Details
The debenture will mature on August 31, 2024, and will accrue interest at the rate of 8.00% per annum payable semi-annually on the last day of February and August of each year commencing on February 29, 2020. At the holder’s option, the debenture may be converted into Class A subordinate voting shares of the Company (“Class A Shares”) at any time prior to the close of business on the earlier of the business day immediately preceding the maturity date and the business day immediately preceding the date fixed for redemption of the debenture. The conversion price will be $0.75 for each Class A Share, being a conversion rate of 1,333.3333 Class A Shares issuable for each $1,000 principal amount of the debenture, subject to adjustment in certain circumstances.

Subject to specified conditions, the Company may force the conversion of the debenture into Class A Shares if the volume weighted average trading price of the Class A Shares during the 20 trading days ending on the fifth trading day preceding the date on which notice of the forced conversion is given is not less than 125% of the conversion price at any time (i) after August 31, 2021, or (ii) if the principal sum of the debenture outstanding is $4,000,000 or less.

Subject to specified conditions, the debenture may be redeemed at the Company’s option at par plus accrued and unpaid interest at any time (i) after August 31, 2023 if the volume weighted average trading price of the Class A Shares during the 20 trading days ending on the fifth trading day preceding the date on which notice of the redemption is given is not less than 125% of the conversion price, or (ii) if the principal sum of the debenture outstanding is $4,000,000 or less.

Subject to specified conditions and subject to any required regulatory and/or stock exchange or marketplace approvals, the Company will be entitled to repay all or a portion of the outstanding principal amount of the debenture on maturity by issuing that number Class A Shares equal to the quotient obtained by dividing the applicable portion of the principal amount to be repaid in Class A Shares by 85% of the volume weighted average trading price of the Class A Shares during the 20 trading days ending on the fifth trading day preceding the maturity date. Until August 31, 2021, the Company will also be entitled to satisfy its obligation to pay interest by adding the amount of the applicable interest payment to the principal amount of the debenture.  The interest added to the principal amount of the debenture will be convertible into Class A Shares in accordance with the conversion features of the debenture, subject to the requirements of any regulatory and/or stock exchange or marketplace at the time of conversion.

Upon the occurrence of a change of control of the Company or the sale by the Company of its core assets, the Company will be required to make an offer to purchase the debenture at a price equal to 105% of the principal amount plus accrued and unpaid interest.

The investment agreement provides Fengate with certain rights following closing of the private placement, including a right to participate in future equity offerings to maintain its pro rata equity interest, a right of first refusal over certain future debt financings, a right to nominate one individual to serve on the Company’s board of directors (or, if such right is not exercised, the right to designate a board observer) and a demand registration right to sell all of its Class A Shares. On closing of the private placement, Fengate will be paid a one-time upfront fee of $1,500,000.

Advisors
Redbird Sports Group acted as financial advisor to theScore and PJT Partners acted as financial advisor to Fengate in connection with this transaction. McCarthy Tétrault LLP and Duane Morris LLP acted as legal advisors to theScore, and Torys LLP acted as legal advisor to Fengate in connection with this transaction.