Gaming and e-sports provider Esports Entertainment Group (EEG) has announced that it has reached an agreement to convert the majority of its debt into company shares.
The company completed the deal with the debt holder, Alto Opportunity Master Fund, which agreed to convert the remaining balance of the company’s debt into new, unsecured shares thereafter EEGs next capital increase.
Upon completion, the agreement, along with a number of prior transactions, will reduce the company’s debt by approximately $42 million, resulting in a largely debt-free balance sheet. EEG said the move represents “significant progress” in addressing the company’s remaining issues Nasdaq List defects.
EEG exchanges debts
The company narrowly avoided delisting towards the end of 2022 and launched a plan to return to listing after the CEO left. With the completion of the transaction, EEG will be able to demonstrate that the company is in compliance with Nasdaq’s requirements set forth in the exchange’s listing rules for equity of at least $2.5 million.
“We appreciate the tremendous support of our senior lender, who has agreed to convert its senior convertible notes into preferred stock. We believe this demonstrates his confidence in the company’s prospects, while improving our balance sheet, increasing cash flow and providing us with more revenue. “We provide ourselves with financial flexibility to implement our new growth strategy,” said EEG CEO Alex Igelman.
Alto director Waqas Khatri himself was convinced of the company’s prospects.
“We are pleased to support this debt reduction transaction, which not only demonstrates our confidence in the company’s leadership, direction and financial discipline, but also reflects our belief in the new management team’s coherent vision for the company’s technology assets,” he said.
“We welcome the company’s more operationally efficient business model and the team’s focus on creating long-term value and profitability. This transaction is a testament to our commitment to the company and we are honored to be part of its success story.”
Strategic realignment of the EEG
This week Igelman announced a series of initiatives to divest itself of a number of revenue streams and focus on a more efficient B2C division. The Managing Director reiterated the content of this letter and emphasized that the proposed savings would put the company on a secure financial footing.
“I recently outlined a number of initiatives that are already well underway to focus our efforts on key business areas in the igaming, e-sports and e-simulator markets while streamlining operations,” he said .
“Through the actions we have already taken, we expect to reduce our operating costs by over $4 million on an annual basis and have identified additional cost reduction opportunities in the future.
“Including this recent promissory note exchange, we have also reduced debt and other liabilities by over $27 million year to date. Therefore, I believe the company’s financial and operational outlook is back on track to capitalize on the esports opportunities ahead.”