Partial Redemption of ALLO Investment |
6 Months Ended |
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Jun. 30, 2025 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Partial Redemption of ALLO Investment | Partial Redemption of ALLO Investment Nelnet had both voting and preferred membership interest investments in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO"). In June 2025, ALLO executed a financing transaction that resulted in gross proceeds to ALLO of $500 million (the “Financing”). In conjunction with the Financing, Nelnet, ALLO, and certain other ALLO investors entered into a Membership Unit Redemption Agreement (the “Redemption Agreement”) pursuant to which ALLO agreed to redeem certain of its membership interests from certain investors in ALLO, including Nelnet (the “Transaction”). As part of the Transaction, ALLO redeemed all of Nelnet's outstanding preferred membership interests on June 4, 2025, including the preferred return accrued on such membership interests through the Transaction's closing date. In addition, ALLO redeemed a portion of Nelnet’s voting membership interest in ALLO. Upon closing, Nelnet received cash proceeds of $410.9 million from ALLO for these redemptions and recognized a pre-tax gain of $175.0 million, which is included in "gain on partial redemption of ALLO investment" on the Company's consolidated statements of income. Following the closing of the Transaction, Nelnet no longer owns any preferred membership interests in ALLO, but maintains a significant voting equity investment in ALLO. Nelnet’s ownership of voting membership interest in ALLO decreased from 45% to 27%. Nelnet will continue to account for its remaining 27% voting membership interest in ALLO under the Hypothetical Liquidation at Book Value (HLBV) method of accounting, with the carrying value of such interest remaining at $0. As part of the ALLO recapitalization transaction completed in December 2020, Nelnet and SDC (a third-party global digital infrastructure investor and member of ALLO) entered into an agreement in which Nelnet has a contingent obligation to pay SDC in the event Nelnet disposes of its voting membership interests in ALLO that it holds, and realizes from such disposition certain targeted return levels. Upon closing of the Transaction described above, Nelnet recalculated its contingent obligation to reflect the reduction in Nelnet's voting membership interests that are subject to the contingency. This resulted in a reduction in the estimated fair value of the contingent payment liability of $4.9 million during the second quarter of 2025, which is included in (and decreased) "other expenses" on the Company's consolidated statements of income. Based on Nelnet's remaining voting membership interests in ALLO, the maximum contingent obligation that Nelnet may owe SDC upon future disposals of Nelnet's voting membership interests in ALLO is $9 million (down from $35 million). The estimated fair value of the contingent payment as of June 30, 2025 is $3.4 million, which is included in "other liabilities" on the consolidated balance sheet.
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