SCHEDULE: RumbleOn Secures $10M Subordinated Loan from Insiders

RumbleOn, Inc. secured $10 million in high-interest subordinated loans from key stakeholders, including Stone House Capital Management and Mark Cohen, to prepay existing term loan debt.

Summary

• RumbleOn, Inc. entered into commitment letters on August 10, 2025, to secure approximately $10 million in subordinated loans.
• The loans are provided by Stone House Capital Management, LLC, Mark Tkach, and Bill Coulter, with each committing $3,333,334.
• Proceeds from the subordinated loans will be used to prepay outstanding principal amounts owed under the Issuer's existing term loan credit agreement.
• The subordinated loans bear an interest rate of 13.0% per annum, payable semi-annually in-kind by increasing the principal amount.
• The loans will mature thirty-six months after the funding date and are contractually subordinated to the existing senior loans.
• The commitment parties have agreed to hold these commitments until September 5, 2025.
• Mark Cohen, a reporting person, received 61,728 restricted stock units (RSUs) on June 4, 2025, vesting on June 4, 2026.
• Additionally, 28,531 August 2024 RSUs vested on June 4, 2025, and were subsequently transferred to SH Capital Partners, L.P. on June 6, 2025, as a bona fide gift.

Sentiment

Score: 4

Explanation: While securing funding is positive, the high 13.0% PIK interest rate and the subordinated nature of the loans, coupled with the use of funds to prepay existing debt, suggest the company is taking on expensive capital, potentially due to financial constraints or to manage existing debt covenants. This indicates a challenging financial position rather than robust health.

Positives

• Secured $10 million in new funding, which can improve immediate liquidity or manage existing debt obligations.
• The funds are specifically earmarked to prepay outstanding principal on the existing term loan, potentially reducing senior debt burden.

Negatives

• The new subordinated loans carry a high annual interest rate of 13.0%.
• Interest on the new loans is payable in-kind (PIK), meaning it accrues to the principal, increasing the debt burden over time rather than requiring immediate cash payments.
• The new loans are contractually subordinated to existing senior loans, indicating a higher risk profile for the lenders and potentially for the company's overall debt structure.

Risks

• High interest rate (13.0% PIK) on the new subordinated loans increases the cost of capital and future debt obligations.
• The subordination of the new loans means they would be repaid only after senior debt in a liquidation event, increasing risk for these lenders.
• Reliance on related parties (Stone House Capital Management, LLC and Mark Cohen) for significant financing may raise corporate governance concerns.
• The need to prepay existing term loan debt with more expensive, subordinated debt could signal underlying financial strain or liquidity challenges.

Future Outlook

The filing indicates a strategic move to restructure debt by securing new subordinated loans to prepay existing term loan obligations. The commitment for these loans is set to expire on September 5, 2025, suggesting a near-term funding event. The PIK interest structure implies a focus on preserving cash flow in the short term, with the principal amount growing over the 36-month maturity period.

Industry Context

The financing activity, particularly the high-interest subordinated debt and its use for prepaying existing term loans, suggests that RumbleOn may be navigating a challenging financial environment. Companies often resort to such financing when traditional bank lending is constrained or when seeking to manage covenants on existing senior debt. This could reflect broader pressures within the powersports or vehicle retail industry, such as fluctuating consumer demand, inventory management issues, or rising operational costs, making access to cheaper capital more difficult.

Comparison to Industry Standards

• A 13.0% annual interest rate, especially with PIK terms, is significantly higher than typical senior secured debt rates for established companies, often indicating a higher perceived risk by lenders or limited access to conventional financing.
• The subordination of new debt to existing senior loans is a common structure for riskier tranches of financing, but the high rate suggests the company's credit profile may be below industry averages for similar-sized public companies seeking capital.
• The involvement of related parties (Stone House Capital Management, LLC and Mark Cohen) in providing this financing is not uncommon for companies facing financial challenges, as insiders may be more willing to provide capital under less favorable terms than external institutional lenders, but it also raises questions about the company's ability to secure arms-length financing.

Corporate Governance

Related Party Transactions

• Stone House Capital Management, LLC and Mark Cohen, who are reporting persons in this filing, are among the 'Commitment Parties' providing the $10 million in subordinated loans to RumbleOn, Inc.
• Mark Cohen received restricted stock units for his service on the board of directors, and vested RSUs were transferred to SH Capital Partners, L.P., which is also a reporting person.

Stakeholder Impact

• Shareholders: Potential for increased debt burden due to PIK interest, but also potential benefit from improved debt structure and liquidity if the funds alleviate immediate financial pressure. The high cost of capital could impact future profitability.
• Senior Creditors: Benefit from the prepayment of outstanding principal amounts owed under the Credit Agreement, potentially reducing their exposure.
• Subordinated Lenders (Commitment Parties): Will receive a high 13.0% PIK interest rate, but bear higher risk due to the subordinated nature of their loans.
• Employees/Customers/Suppliers: Indirectly impacted by the company's financial stability; securing funding may provide operational continuity.

Next Steps

• The commitment for the subordinated loans is available until September 5, 2025, indicating the funding is expected to occur by this date.
• The June 2025 RSUs granted to Mark Cohen are scheduled to vest on June 4, 2026.

Key Dates

Recommendation

The filing reveals RumbleOn is securing $10 million in high-cost, subordinated debt from related parties to prepay existing senior debt. While securing funds is crucial for liquidity, the 13.0% PIK interest rate and subordination suggest financial strain and a high cost of capital. This transaction, while addressing immediate debt management, does not signal strong financial health or a clear path to significant value creation in the near term. A seasoned investor would likely view this with caution, awaiting further clarity on the company's operational performance and long-term financial strategy before making a definitive investment decision.

Keywords

RumbleOn, Subordinated Loan, Debt Financing, SEC Filing, Schedule 13D, Restricted Stock Units, Corporate Finance, Related Party Transaction, Debt Prepayment