BGC Partners Inc. purchased approximately 16.6 million newly issued exchangeable limited partnership units of Newmark Group Inc. for $242.0 million.
These newly issued units are exchangeable, at BGC's discretion, into either class A common shares or class B common shares of Newmark. The units sold to BGC were not subject to the 180-day "lock-up" restriction contained in the underwriting agreement for Newmark's initial public offering.
BGC funded the purchase using proceeds from its controlled equity offering program. The company now owns 59.2% of the 253.3 million fully diluted shares of Newmark currently outstanding.
Newmark will use the proceeds from these units to repay in full the remaining $242.0 million balance of its $575 million unsecured senior term loan before the end of the first quarter.
As a result of the debt repayment, both the companies' consolidated stand-alone long-term debt are expected to be reduced by $270.7 million, all else equal, when compared to year-end 2017. The companies therefore expect annualized interest expenses to decrease by more than $11.4 million, and also expect to have ratios of long-term debt to adjusted EBITDA of below 2.5x as of the end of the first quarter, all else equal.
BGC also said it is trending toward the high end of its previously stated consolidated outlook for revenues and adjusted earnings for the first quarter.
BGC still expects to pursue a distribution to its common stockholders of all of the class A common shares and class B common shares of Newmark that BGC then owns in a manner that is intended to qualify as generally tax-free for U.S. federal income tax purposes. As currently contemplated, class A common shares of Newmark held by BGC would be distributed to the holders of class A common shares of BGC, and class B common shares of Newmark held by BGC would be distributed to the holders of class B common shares of BGC.
This spinoff would include any Newmark common shares that BGC obtains as a result of the exchange of the Newmark units acquired by BGC in the aforementioned transactions.
