Workhorse Group achieved a 180-degree swing from the debtor to debt-free status by paying a common stock premium to a hedge fund financing source preferred by previous management.
The Loveland, Ohio-based developer of drone-integrated electric cars for last-mile delivery announced Wednesday that it has agreed to exchange senior secured convertible notes with a 4% interest rate held by High Trail Capital for approximately $29.7 million in Workhorse stock.
The price includes a 7 percentage point premium, according to a Securities and Exchange Commission filing. It eliminates the company’s last outstanding debt from its balance sheet. High Trail traded $27.5 million in notes for 5,793,888 shares or about $4.75 per share.
Workhorse (NASDAQ: WKHS) shares finished Wednesday at $4.44, down 11.90 percent in an electric car stock sell-off.
“Over the past year, we’ve taken major steps to stabilize and enhance our financial position in order to transition Workhorse from an advanced technological start-up to an efficient manufacturing firm,” Workhorse CFO Bob Ginnan stated in a press release.
“We are moving forward with a debt-free balance sheet, more financial flexibility, and a stronger financial basis to continue delivering on our production and product roadmaps,” said the company.
No longer enslaved by debt
Workhorse was caught in a loop of living on borrowed money and switching loan instruments to seek better bargains based on a stock price driven by retail investors expecting Workhorse to win a U.S. Postal Service contract for next-generation delivery trucks just 18 months ago.
When the Postal Service contract was granted to Oshkosh Corp. in February 2021, Workhorse stock speculators fled, pushing the share price down 50% in two trading sessions. Last August, management was restructured as a result of production delays for its C-Series electric van, the COVID epidemic, and quality difficulties.
The stock price fell further, falling below $2.50 before rebounding.
When new CEO Richard Dauch took over in August, he performed a months-long evaluation of the firm before dropping a lawsuit in the United States Court of Claims seeking to reverse the mail truck judgment. He also halted most production and recalled 41 vans that had been sold to clients.
Workhorse will finish and sell a variant of GreenPower Motor Co.’s medium-duty Class 4 vehicle to bridge the gap until it is ready with new Class 3-6 trucks.
Workhorse is watching from the sidelines as some members of Congress question Oshkosh and the Postal Service’s choice to build the bulk of new gasoline-powered postal trucks despite the Biden administration’s vow to convert the federal fleet to electric power.
