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Mezzanine Equity
12 Months Ended
Sep. 30, 2024
Equity [Abstract]  
Mezzanine Equity

16. Mezzanine Equity

Series A Convertible Preferred Stock

On August 28, 2023 (the “Original Issuance Date”), BrightView Holdings, Inc. entered into an Investment Agreement with each of Birch Equity Holdings, LP, a Delaware limited partnership, and Birch-OR Equity Holdings, LLC, a Delaware limited liability company (collectively, the “Investors”), pursuant to which the Company issued and sold, in a private placement, an aggregate of 500,000 shares of the Company’s Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $500.0 (the “Issuance”), excluding issuance costs. The Series A Preferred Stock was recorded at that amount, net of issuance costs of $5.0, in the Company’s Consolidated Balance Sheets and statement of changes in stockholders’ equity and mezzanine equity.

Mezzanine Classification

The Series A Preferred Stock is redeemable in the event of certain change of control events involving the Company. S99-3A(2) of the SEC’s Accounting Series Release No. 268 (“ASR 268”) requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. Preferred securities that are mandatorily redeemable are required to be classified by the issuer as liabilities whereas under ASR 268 guidance an issuer should classify a preferred security whose redemption is contingent on an event not entirely in control of the issuer as mezzanine equity. The Series A Preferred Stock is not mandatorily redeemable, however, a change in control is not solely in control of the Company, accordingly, the Company determined that mezzanine treatment is appropriate for the Series A and has presented it as such in our Consolidated Balance Sheets and statement of changes in stockholders’ equity and mezzanine equity, as of and for the year ended September 30, 2024.

Liquidation Preference

The Series A Preferred Stock will rank senior to the Company’s common stock, par value $0.01 per share (the “Common Stock”), with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The aggregate liquidation preference of the Series A Preferred Stock was $512.0 and $503.2 as of September 30, 2024 and September 30, 2023, respectively.

Dividends

Holders of the Series A Preferred Stock are entitled to a dividend at the rate of 7.0% per annum, compounding quarterly, paid in kind or paid in cash, at the Company’s election. Dividends paid in kind are measured at fair value. For any quarter in which the Company elects not to pay the dividend in cash, such dividend will become part of the liquidation preference of each such share of Series A Preferred Stock as of the applicable dividend payment date. Shares of the Series A Preferred Stock also entitle the holder to participate in any dividends paid on the Common Stock on an as-converted basis. During the year ended September 30, 2024, the Company paid in-kind dividends of $8.9 in the aggregate on the Series A Preferred Stock which increased the aggregate liquidation preference of the Series A Preferred Stock by the same amount. In addition, the Company declared cash dividends of $26.8 during the year ended September 30, 2024, of which $17.8 was paid. Accrued dividends of $9.0 are presented within Accrued expense and other current liabilities on the Consolidated Balance Sheets as of September 30, 2024. There were no dividends issued to common stockholders during the years ended September 30, 2024 and 2023.

Voting

The Series A Preferred Stock will be entitled to vote with the holders of the Common Stock on an as-converted basis (subject to the conversion limitations set forth in the Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”)). Holders of the Series A Preferred Stock will be entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series A Preferred Stock, authorizations or issuances by the Company of securities that are senior to, or equal in priority with, the Series A Preferred Stock, increases or decreases in the number of authorized shares of Series A Preferred Stock after the Issuance, certain mergers or consolidations of the Company and certain restricted acquisitions.

Notwithstanding the foregoing, pursuant to the terms of the Certificate of Designations, in no event shall the Series A Preferred Stock have voting rights in excess of 49% (together with any shares of Common Stock otherwise held by the Investors, permitted transferees and their affiliates) of the then issued and outstanding Common Stock.

Redemption

At any time on or after the fourth anniversary of the Original Issuance Date, the Company may redeem (the “Company Redemption Right”), ratably, in whole (or, so long as the Company reasonably determines in good faith (taking into account solely the holders’ ownership of the Series A Preferred Stock and ownership of any Common Stock received in connection with the conversion of such Series A Preferred Stock) that such partial redemption of Series A Preferred Stock will be treated as a sale or exchange for United States federal income tax purposes pursuant to Section 302(b) of the Internal Revenue Code of 1986, in part), the shares of Series A Preferred Stock of any holder outstanding at such time at a redemption price per share of Series A Preferred Stock equal to the following: (A) if the applicable redemption date is on or after the fourth anniversary of the Original Issuance Date and before the fifth anniversary of the Original Issuance Date, the greater of (1) the product of (x) the sum of (I) the liquidation preference of such shares of Series A Preferred Stock to be redeemed, plus (II) the accrued dividends in respect of such share of Series A Preferred Stock to be redeemed as of such redemption date, multiplied by (y) 105% and (2) the volume weighted average price (“VWAP”) of the average of the Common Stock for each of the 10 consecutive full trading days ending on, and including, the trading day immediately preceding such day of measurement, adjusted pursuant to the Certificate of Designations (the “Current Market Price”) as of such redemption date of the Common Stock into which such shares of Series A Preferred Stock could be converted on an as converted basis; (B) if the applicable

redemption date is on or after the fifth anniversary of the Original Issuance Date and before the sixth anniversary of the Original Issuance Date, the greater of (1) the product of (x) the sum of (I) the liquidation preference of such share of Series A Preferred Stock to be redeemed, plus (II) the accrued dividends in respect of such share of Series A Preferred Stock to be redeemed, multiplied by (y) 103% and (2) the Current Market Price as of such redemption date of the Common Stock into which such shares of Series A Preferred Stock could be converted on an as converted basis; and (C) if the applicable redemption date is on or after the sixth anniversary of the Original Issuance Date, the greater of (1) the product of (x) the sum of (I) the liquidation preference of such share of Series A Preferred Stock to be redeemed, plus (II) the accrued dividends in respect of such share of Series A Preferred Stock to be redeemed , multiplied by (y) 100% and (2) the Current Market Price as of such redemption date of the Common Stock into which such shares of Series A Preferred Stock could be converted on an as converted basis. Notwithstanding the foregoing, the Company will not exercise the Company Redemption Right, or otherwise send a notice of company redemption, in respect of the redemption of any Series A Preferred Stock unless the Company has sufficient funds legally available to fully pay the redemption price in respect of all shares of Series A Preferred Stock called for redemption.

Change in Control Redemption

Upon certain change of control events involving the Company, the holders of Series A Preferred Stock may, at such holder’s election, convert all or a portion of its shares of Series A Preferred Stock, provided that if the holder does not make such an election with respect to all of its shares of Series A Preferred Stock, the Company shall redeem all of such holder’s shares of Series A Preferred Stock that have not been so converted at a purchase price per share of Series A Preferred Stock, payable in cash equal to the greater of (A) the sum of the liquidation preference thereof, plus any accrued dividends as of the applicable change of control purchase date and (B) the amount of cash and the fair market value of any other property that the holder would have received if such holder had converted their Series A Preferred Stock into Common Stock immediately prior to the change of control (without regard to any limitations on conversions set forth in the Certificate of Designations.

Conversion

The Series A Preferred Stock is convertible, in whole or in part, at the option of the holders (subject to the conversion limitation set forth in the Certificate of Designations) into shares of Common Stock at an initial conversion rate of 105.9322 shares of Common Stock per share of Series A Preferred Stock.

At any time after the third anniversary of the Original Issuance Date, if (i) the VWAP of the Common Stock exceeds $18.88 (the “Mandatory Conversion Price”), for at least 20 trading days in any period of 30 consecutive trading days and (ii) either (x) the Common Stock VWAP is greater than the Mandatory Conversion Price on the trading day immediately prior to the date the Company sends the applicable notice of mandatory conversion or (y) the Company has not filed a press release or report under the Securities Exchange Act of 1934, as amended, between the last trading day in such 30 day trading period and the date the Company sends the applicable notice of mandatory conversion, then the Company may elect to convert all or any portion of the Series A Preferred Stock into the relevant number of shares of Common Stock.

Notwithstanding the foregoing, pursuant to the terms of the Certificate of Designations, in no event shall the Series A Preferred Stock be convertible into Common Stock in a manner that would result in the Investors, their permitted transferees and affiliates holding more than 49% (together with any shares of Common Stock otherwise held by the Investors, permitted transferees and their affiliates) of the then issued and outstanding Common Stock.

The calculations of earnings per share for all periods presented herein during which the Series A Preferred Stock was outstanding do not treat conversion of the Series A Preferred Stock as if it had occurred, as the effect of conversion would be anti-dilutive.

As of September 30, 2024, the Series A Preferred Stock is not probable of becoming redeemable as the most likely method of settlement is through conversion which is likely to occur before the holder right to request redemption becomes exercisable.