What changed in this filing

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Item 1A. Risk Factors

2021-07-29 compared with 2021-04-30 · 40 added, 14 removed, 801 unchanged (6% of the section changed)

399 unchanged sentences

At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from LIBOR is anticipated to be gradual over the coming years.

As of March 31, 2021, we had $175.0 million of total debt outstanding under facilities with interest rates based on floating-rate indices.

As of June 30, 2021, we had $125.0 million of total debt outstanding under facilities with interest rates based on floating-rate indices.

We cannot predict what reference rate would be agreed upon or what the impact of any such replacement rate would be to our interest expense.

18 unchanged sentences

We have not obtained a formal determination from the SEC as to our status under the Investment Company Act and, consequently, any violation of the Investment Company Act would subject us to material adverse consequences.

Risks Related to Our Acquisition of Transtar, LLC

Our acquisition of Transtar, LLC (“Transtar”) may not achieve its intended results and we may be unable to successfully integrate the operations of Transtar.

On July 28, 2021, we completed our previously announced acquisition of 100% of the equity interests of Transtar (the “Transtar Acquisition”), a wholly-owned short-line railroad subsidiary of United States Steel Corporation (the “Seller”).

Transtar is comprised of six short-line freight railroads, including two that connect to Seller’s largest production facilities in North America:

the Gary Railway Company, Indiana;

The Lake Terminal Railroad Company, Ohio;

Union Railroad Company LLC, Pennsylvania;

Fairfield Southern Company Inc., Alabama;

Delray Connecting Railroad Company, Michigan;

and the Texas & Northern Railroad Company, Texas.

We are subject to certain risks relating to the Transtar Acquisition, which could have a material adverse effect on our business, results of operations and financial condition.

Such risks may include, but are not limited to:

• failure to successfully integrate Transtar in a manner that permits us to realize the anticipated benefits of the acquisition;

• difficulties and delays integrating Transtar’s personnel, operations and systems and retaining key employees;

• higher than anticipated costs incurred in connection with the integration of the business and operations of Transtar;

• challenges in operating and managing rail lines across geographically disparate regions;

• disruptions to our ongoing business and diversions of our management’s attention caused by transition or integration activities involving Transtar;

• challenges with implementing adequate and appropriate controls, procedures and policies in Transtar’s business;

• Transtar’s dependence on the Seller as its primary customer;

• difficulties expanding our customer base;

• difficulties arising from Transtar’s dependence on the Seller to provide a variety of necessary transition services to Transtar and any failure by the Seller to adequately provide such services;

• assumption of pre-existing contractual relationships of Transtar that we may not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business;

• incurring debt to finance the Transtar Acquisition, which increased our debt service requirements, expense and leverage;

• any potential litigation arising from the transaction;

• other risks described in Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

The successful integration of a new business also depends on our ability to manage the new business, realize forecasted synergies and full value from the combined business.

Our business, results of operations, financial condition and cash flows could be materially adversely affected if we are unable to successfully integrate Transtar.

Risks Related to Our Manager

21 unchanged sentences

From time to time, affiliates of Fortress focus on investments in assets with a similar profile as our target assets that we may seek to acquire.

affiliates may have meaningful purchasing capacity, which may change over time depending upon a variety of factors, including, but not limited to, available equity capital and debt financing, market conditions and cash on hand.

These affiliates may have meaningful purchasing capacity, which may change over time depending upon a variety of factors, including, but not limited to, available equity capital and debt financing, market conditions and cash on hand.

Fortress has multiple existing and planned funds focused on investing in one or more of our target sectors, each with significant current or expected capital commitments.

6 unchanged sentences

The ability of our Manager and its officers and employees to engage in other business activities, subject to the terms of our Management Agreement, may reduce the amount of time our Manager, its officers or other employees spend managing us.

In addition, we may engage (subject to our strategy) in material transactions with our Manager or another entity managed by our Manager or one of its affiliates, including Seacastle Inc., FECI and FYX, which may include, but are not limited to, certain acquisitions, financing arrangements, purchases of debt, co-investments, consumer loans, servicing advances and other assets that present an actual, potential or perceived conflict of interest.

In addition, we may engage (subject to our strategy) in material transactions with our Manager or another entity managed by our

Manager or one of its affiliates, including Seacastle Inc., FECI and FYX, which may include, but are not limited to, certain acquisitions, financing arrangements, purchases of debt, co-investments, consumer loans, servicing advances and other assets that present an actual, potential or perceived conflict of interest.

Our board of directors adopted a policy regarding the approval of any “related person transactions” pursuant to which certain of the material transactions described above may require disclosure to, and approval by, the independent members of our board of directors.

21 unchanged sentences

Our asset acquisition strategy may evolve in light of existing market conditions and investment opportunities, and this evolution may involve additional risks depending upon the nature of the assets we target and our ability to finance such assets on a short or long-term basis.

Opportunities that present unattractive risk-return profiles relative to other available opportunities under particular market conditions may become relatively attractive under changed market conditions and changes in market conditions

may therefore result in changes in the assets we target.

Decisions to make acquisitions in new asset categories present risks that may be difficult for us to adequately assess and could therefore reduce or eliminate our ability to pay dividends on our common shares or have adverse effects on our liquidity or financial condition.

46 unchanged sentences

In such event, U.S.

holders of our common shares will be subject to imputed interest charges and other disadvantageous tax treatment with respect to certain “excess distributions” from the PFIC and gain realized upon the direct or indirect sale of the PFIC (including through the sale our common shares).

holders of our common shares will be subject to imputed interest charges and other disadvantageous tax treatment with respect

to certain “excess distributions” from the PFIC and gain realized upon the direct or indirect sale of the PFIC (including through the sale our common shares).

Prospective investors should consult their tax advisors regarding the potential impact of the rules regarding CFCs and PFICs before investing in our shares.

135 unchanged sentences

Such a limitation could occur if our corporate subsidiaries were to experience an “ownership change” as defined under Section 382 of the Code.

The rules for determining ownership changes are complex, and changes in the ownership of our shares could

cause an ownership change in one or more of our corporate subsidiaries.

The rules for determining ownership changes are complex, and changes in the ownership of our shares could cause an ownership change in one or more of our corporate subsidiaries.

Sales of our shares by our shareholders, as well as future issuances of our shares, could contribute to a potential ownership change in our corporate subsidiaries.

42 unchanged sentences

Similarly, if a shareholder acquires additional common shares, it might be allocated income, gain, loss, and deduction realized by us prior to its ownership of such common shares.

Consequently, our shareholders may recognize income in excess of cash distributions received from us, and any income so included by a shareholder would increase the basis such

shareholder has in its common shares and would offset any gain (or increase the amount of loss) realized by such shareholder on a subsequent disposition of its common shares.

Consequently, our shareholders may recognize income in excess of cash distributions received from us, and any income so included by a shareholder would increase the basis such shareholder has in its common shares and would offset any gain (or increase the amount of loss) realized by such shareholder on a subsequent disposition of its common shares.

Rules regarding U.S.

46 unchanged sentences

We have initially reserved 30,000,000 common shares for issuance under the Incentive Plan.

As of March 31, 2021, rights relating to 2,599,624 of our common shares were outstanding under the Incentive Plan.

As of June 30, 2021, rights relating to 2,599,624 of our common shares were outstanding under the Incentive Plan.

In the future on the date of any equity issuance by us during the ten-year term of the Incentive Plan (including in respect of securities issued as consideration in an acquisition), the maximum number of shares available for issuance under the Plan will be increased to include an additional number of common shares equal to ten percent (10%) of either (i) the total number of common shares newly issued by us in such equity issuance or (ii) if such equity issuance relates to equity securities other than our common shares, a number of our common shares equal to 10% of (A) the gross capital raised in an equity issuance of equity securities other than common shares during the ten-year term of the Incentive Plan, divided by (B) the fair market value of a common share as of the date of such equity issuance.

18 unchanged sentences

Our net cash provided by operating activities has been less than the amount of distributions to our shareholders.

liquidity and financial condition, net cash provided by operating activities, restrictions imposed by applicable law, our taxable income, our operating expenses and other factors our board of directors deem relevant.

The declaration and payment of dividends to holders of our common shares will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including actual results of operations, liquidity and financial condition, net cash provided by operating activities, restrictions imposed by applicable law, our taxable income, our operating expenses and other factors our board of directors deem relevant.

Our long term goal is to maintain a payout ratio of between 50-60% of funds available for distribution, with remaining amounts used primarily to fund our future acquisitions and opportunities.

2 unchanged sentences

In addition, pursuant to the Partnership Agreement, the General Partner will be entitled to receive incentive allocations before any amounts are distributed by us based both on our consolidated net income and capital gains income in each fiscal quarter and for each fiscal year, respectively.

Furthermore, the terms of our Series A preferred shares generally prevent us from declaring or paying dividends on or repurchasing our common shares or other junior capital unless all accrued distributions on such preferred shares have been paid in full.

Furthermore, the terms of our Series A preferred shares generally prevent us from declaring or paying

dividends on or repurchasing our common shares or other junior capital unless all accrued distributions on such preferred shares have been paid in full.

Anti-takeover provisions in our operating agreement and Delaware law could delay or prevent a change in control.

25 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors