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PIF extending loan facility + acquiring more shares in Lucid: A unit of the Public Investment Fund (PIF) is pouring a total of USD 1.5 bn in US luxury EV manufacturer Lucid, according to a statement from Lucid. The Saudi sovereign wealth fund’s Ayar Third Investment has reached an agreement with Lucid to take USD 750 mn worth of convertible preferred stock via private placement, and commit an additional USD 750 mn through an unsecured delayed draw term loan facility (DDL).
The proceeds will finance the company’s capex and working capital, among other things, the statement reads.
What we don’t know: The statement doesn’t provide details on the conditions for the conversion or the implied price per share at which Ayar is buying in, nor does it disclose the withdrawal limits or periods for the DDL.
Lucid has not yet tapped the DDL, which could signal that the company is keeping it as a fall-back option if it needs more funding to tap into. Lucid CEO Peter Rawlinson said in March that his company cannot depend on the “bottomless wealth” of its Saudi owner and therefore needs to raise funds this year. “It’s inevitable we need to raise in the future, it’s just a question of when,” Rawlinson told the salmon-colored paper. “We need to pick our moment.”
REMEMBER- This is Ayar’s second investment in Lucid this year, after it took USD 1 bn in convertible preferred stocks last March to fund the EV maker’s capex and working capital.
SOUND SMART- Convertible preferred stock is essentially a kind of hybrid between equity and a bond. There are three keys here: “Preferred” means that Ayar gets dividend payments if Lucid starts making them, just like regular preferred stock. But Ayar is also locking in upside: It’s not buying common stock in the company. If the value of Lucid’s shares go above the price at which Ayar bought in, it can — if it wants — swap its convertible preferred stock for ordinary shares and book the difference in value as gain on the investment.
What about delayed draw term loans? These operate like any other loan facility, only with the caveat that they are withdrawn in set intervals — allowing for withdrawal periods every three, six, or nine months — within certain limits, which are both agreed in advance. Lenders could also link withdrawal periods with certain KPIs, if they wish.
