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In a strategic move to bolster its capital, Kingsway Financial Services Inc . (NYSE:KFS), currently trading at $7.87 near its 52-week low with a market capitalization of $217 million, has entered into Subscription Agreements with accredited investors, selling 176,756 shares of a newly created Class C Preferred Stock at $25 per share, raising $4.4 million in a private placement.
According to InvestingPro data, the company has been facing profitability challenges, reporting a loss of $0.27 per share in the last twelve months. The transaction, which took place between February 12 and February 14, allows for additional sales up to $6 million, less the initial proceeds.
The Class C Preferred Stock, not registered under the Securities Act, is convertible into Kingsway’s common stock, with each preferred share converting to 2.63158 common shares prior to February 12, 2032. The Class C Preferred Stock is pari passu with the company’s Class B Preferred Stock and senior to other capital stock regarding dividends and liquidation preference.
Holders of the Class C Preferred Stock are entitled to an 8% annual dividend, paid quarterly if declared by the board. If dividends accumulate unpaid for more than two quarters, the rate increases to 18%. Upon liquidation, holders will receive $25 per share plus accrued dividends before any junior stock distributions.
Kingsway Financial must redeem all outstanding Class C Preferred Stock by February 12, 2032, at $25 per share plus accrued dividends. The company also has the option to redeem 25% of the issued Class C Preferred Stock following significant asset sales, ensuring a 15% internal rate of return for investors.
The Class C Preferred Stock holders will not have voting rights at shareholder meetings. This financial development, based on a press release statement, is part of Kingsway’s broader strategy to secure funding and enhance its financial structure. With annual revenue of $108.63 million, the company continues to evolve its capital structure.
For deeper insights into KFS’s financial health and growth prospects, investors can access comprehensive analysis through the detailed Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.
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