Better.com's SPAC terms revised to provide an immediate capital infusion

Better.com's merger agreement with special purpose acquisition company Aurora Acquisition was revised to provide the New York-based mortgage lender with immediate capital to support its growth activities.

The new agreement replaces $1.78 billion in financing — consisting of a $1.5 billion public investment in private equity component from Aurora and an affiliate of SoftBank and a $278 million backstop of Aurora's trust account share redemptions — with a $1.5 billion transaction in which all the funds go directly to Better's balance sheet. The original transaction expected that $950 million of the PIPE would have been used to purchase shares from existing Better shareholders.

But the revised agreement again gives Better an implied equity value of approximately $6.9 billion. It provides for a $750 million bridge note, which converts into common stock when the merger closes, and an additional commitment by Aurora's sponsor Novator Capital and SoftBank to fund a second $750 million convertible note at Better's option within 45 days after the deal closes. Novator's redemption backstop facility has been cancelled.

Furthermore, it adds onto SoftBank Vision Fund 2's $500 million April investment in Better, the announcement said.

The bridge financing boosts Better's balance sheet to over $1 billion of cash and cash equivalents.

As refinance volume fades, Better CEO Vishal Garg expects many competitors to cut back on their automation and vertical integration efforts.

"This is exactly the time for us to lean in and accelerate our customer-focused product innovation, and grow our B2B business, which we believe provides us with greater defensibility in a tougher mortgage market," Garg said in a press release. "The incremental $750 million of capital in the form of a commitment to fund a convertible note, on top of the $750 million of cash coming immediately to the balance sheet, will help us to do exactly that."

Earlier this year, Better entered into partnerships with LPL Financial and American Express to originate mortgages.

The revision of the agreement had little effect on Aurora's stock price; the news broke after the market closed on Nov. 30. The SPAC closed that afternoon at $10 per share and opened the next day at $9.99.

Aurora priced its own initial public offering on March 3 and agreed to deal with Better on May 11.

"We are pleased to accelerate the capitalization of Better's balance sheet so they can take immediate advantage of the opportunities ahead of them," said Prabhu Narasimhan, Aurora's chief investment officer.