IoT connectivity-as-a-service firm KORE has signed a backstop facility to provide additional liquidity at the closing of its proposed merger with Cerberus Telecom Acquisition (CTAC) in the event of redemptions by CTAC public shareholders.

This week, KORE signed the backstop agreement with Fortress Credit, which provides KORE and CTAC with the ability to borrow up to $120m, if necessary, to help satisfy the minimum cash condition at the closing of the merger with CTAC. Any notes issued under the facility will be issued at par, bear interest at 5.5% per annum and have a maturity of seven years.

Upon the closing of the merger and at the lender’s option, the notes may be convertible into shares of the public company’s common stock at $12.50 per share. At any time after the two-year anniversary, the company may redeem the notes for cash or force conversion into shares at $16.25.

The backstop agreement contains a customary six-month lock up post-merger closing, prohibiting Fortress from hedging the senior unsecured convertible notes by short selling the company’s common stock or hedging the notes via the company’s warrants or options.

“KORE put this financing facility in place to help ensure we meet all of the conditions to close on our merger with CTAC,” said KORE CEO Romil Bahl. “KORE has been around for almost two decades, pioneering the IoT industry. We have built a strong moat around our business by assembling 44 back-end integrations with telecom carriers around the world, acquiring and nurturing more than 3600 customers, and putting in place a growth strategy focused on becoming a one-stop shop for IoT solutions in five industry sectors, all of which we expect will solidify our position as the independent global IoT leader. We view our business combination with CTAC, and the increased certainty to closing that combination provided by the backstop facility, as an important next step in our continuing success as a company.”

KORE is expected to publicly list during the third quarter, subject to the completion of the merger with CTAC including satisfaction or waiver of the minimum cash condition.

“We worked with KORE and our great long-time partners at Fortress to secure this backstop facility as a pre-emptive measure to remove the redemption risk that currently exists in the SPAC market,” said CTAC CEO Tim Donahue. “Given KORE’s recent announcements concerning its record Q1 earnings and continued positive business trajectory, we remain steadfast in our confidence that the public shareholders of CTAC will vote in favour of the transaction. We felt this facility was a prudent back-up measure to give us further certainty that the transaction will be completed, and KORE will become a successful public company.”

Leslee Cowen, Fortress managing director, added: “We are pleased to partner again with Cerberus and to increase our investment in KORE. With strong financials, earnings visibility, accelerating growth, and a world class management team and board, we believe KORE is positioned for great success as a public company in the fast growing, critically important area of IoT.”