Ascent Capital Group, Inc. (“Ascent”) (NASDAQ: ASCMA) today
announced that its wholly owned subsidiary Monitronics
International, Inc. (“Monitronics” or “the Company”) has entered
into a Restructuring Support Agreement (the “Support Agreement”)
with its largest creditors that will eliminate approximately $885
million in debt.
Under the terms of the Support Agreement, up to approximately
$685 million of debt will be converted to equity, including up to
approximately $585 million of the Company’s 9.125% Senior Notes due
in 2020 and $100 million of the Company’s term loans. The Company
will also receive an additional $200 million in cash from the
Company’s noteholders through an equity rights offering and,
subject to certain conditions, from Ascent in connection with the
proposed merger with Monitronics (that is described in more detail
below), which cash will be used to, among other things, repay
remaining term loan debt.
Following the completion of the restructuring, the Company is
currently expected to have approximately $990 million of total
debt. Recurring Monthly Revenue (“RMR”) as of March 31, 2019, was
$40.8 million.
Under the terms of the Support Agreement, Monitronics and its
subsidiaries would effectuate the proposed transactions through a
partial pre-packaged plan of reorganization (the “Plan”) under
Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”). The Company
has already obtained support for the proposed transactions from
holders of approximately 83 percent of its secured term loans and
approximately 72 percent of its senior unsecured notes.
The Company is confident, based on the Support Agreement reached
with its largest creditors, that it will be able to meet its
financial commitments and otherwise continue to operate its
business as usual throughout the restructuring period, including
paying its employees, dealers and suppliers in the normal course of
business and providing best-in-class home security to all of its
customers. As part of the anticipated Chapter 11 process, the
Company has secured a commitment for $245 million in
debtor-in-possession (DIP) financing that will be replaced by $295
million in exit financing at the completion of the reorganization.
The Support Agreement contemplates that all trade claims (whether
arising prior to or after the commencement of the voluntary Chapter
11 Cases (“Chapter 11 Cases”)) will be paid in full in the ordinary
course of business, and that the Company will continue operating
its business without disruption to its customers, vendors, partners
or employees.
“The restructuring announced today will give our Company the
strongest balance sheet in our industry and, in doing so, will make
us an even stronger competitor and partner,” said Jeffery Gardner,
President and Chief Executive Officer of Monitronics. “With the
support of our largest creditors now solidly behind us, we look
forward to efficiently and definitively completing this debt
restructuring, so we may realize our full potential for long-term
growth and success.”
Concurrent with the completion of the reorganization of
Monitronics under the Plan, Ascent will, subject to, among other
things, the receipt of the requisite approval of Ascent’s
stockholders, merge into Monitronics (the “Merger”). As a
result of the Merger, all assets of Ascent, including an
anticipated approximately $23 million in cash (the “Target Cash
Amount”), will become assets of Monitronics. Ascent’s
stockholders are expected to receive approximately up to 5.82% of
the total shares of Monitronics common stock expected to be issued
and outstanding immediately following completion of the
reorganization and Merger, but subject to dilution by certain
shares issued under a management incentive plan for the Company, in
exchange for all then issued and outstanding shares of Ascent
common stock. If, however, Ascent is expected to hold cash equal to
or in excess of $20 million but less than the Target Cash Amount as
of the date of completion of the reorganization of Monitronics
under the Plan, the stockholders of Ascent will receive a
proportionately lower percentage of shares of Monitronics common
stock, and certain participants in the equity rights offering have
agreed to contribute the shortfall. If Ascent is expected to hold
less than $20 million in cash as of the date of completion of the
reorganization of Monitronics under the Plan, the Merger will not
be consummated, and certain participants in the equity rights
offering have agreed to contribute the full Target Cash Amount.
Additional information regarding the exchange ratio to be applied
in the Merger and the potential consequences of Ascent failing to
participate in the Merger will be set forth in a proxy
statement/prospectus related to the Merger to be filed with the
Securities and Exchange Commission (the “SEC”).
Under the terms of the Support Agreement, Ascent must obtain
approval for the Merger from its stockholders within 65 days
following the date on which Monitronics commences the Chapter 11
Cases (“Petition Date”). If the Merger is not approved within 65
days following the Petition Date or the Merger is not completed on
the effective date of the Plan for any reason (including as a
result of the occurrence of certain circumstances described in the
Support Agreement), the Merger will not occur, and the
restructuring of Monitronics will be completed without the
participation of Ascent. Further, if the restructuring of
Monitronics occurs without the participation of Ascent, Ascent’s
equity interests in Monitronics will be, pursuant to the Plan,
cancelled without Ascent recovering any property or value on
account of such equity interests.
William Niles, Chief Executive Officer and General Counsel of
Ascent, stated, “It was important to us to retain value for the
Ascent stockholders, and the proposed Plan allows us to achieve
this objective. If the restructuring is completed with the
participation of Ascent, we believe Ascent stockholders will be
able to benefit from their investment in what will then be a
financially stronger and more competitive Monitronics.”
A new Monitronics Board of Directors will be appointed at the
completion of the reorganization.
The shares of Series A common stock of Ascent are currently
traded on the NASDAQ Global Select Market (NASDAQ) under the symbol
“ASCMA,” and the shares of Series B common stock of Ascent are
quoted on the OTC Markets under the symbol “ASCMB.” There is
no current trading market for Monitronics’ common stock. However,
Monitronics expects to seek the quotation of its common stock on
the OTC Markets following completion of the reorganization and the
Merger.
It is expected that shares of Ascent Series A common stock will
continue to trade through the completion of the Merger, subject to
applicable Nasdaq listing requirements. Ascent previously disclosed
in 8-Ks filed with the SEC, that it had received letters from
Nasdaq indicating that it was not in compliance with certain public
float and minimum bid price requirements necessary for continued
listing. Ascent is currently in the 180 day grace period during
which it could regain compliance. If upon expiration of this grace
period (which will occur during the restructuring period), Ascent
remains in non-compliance and is unsuccessful in securing an
extension of the grace period, the Ascent Series A common stock
will be delisted.
Monitronics is represented in this matter by Latham &
Watkins LLP, Hunton Andrews Kurth LLP, Moelis & Company LLC and
FTI Consulting Inc. Ascent is represented in this matter by Baker
Botts L.L.P. and B. Riley FBR, Inc.
Forward Looking Statements
This communication includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical fact
are, or may be deemed to be, forward-looking statements.
Forward-looking statements are statements of future expectations
that are based on management’s current expectations and assumptions
and involve known and unknown risks and uncertainties and
projections of results of operations or of financial condition or
forecasts of future events that could cause actual results,
performance or events to differ materially from those expressed or
implied in these statements. Words such as “could,” “will,” “may,”
“assume,” “forecast,” “position,” “predict,” “strategy,” “expect,”
“intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,”
“budget,” “potential,” “forward” or “continue” and similar
expressions are used to identify forward-looking statements.
Without limiting the generality of the foregoing, forward-looking
statements contained in this communication include statements
concerning management’s expectations of plans, strategies,
objectives, growth and anticipated financial and operational
performance, financial prospects; anticipated sources and uses of
capital; the transactions contemplated by the Support Agreement,
including the proposed merger of Ascent and Monitronics (the
“proposed merger”) and the restructuring of Monitronics, including
the expected benefits of these transactions, continued listing of
Ascent’s Series A common stock on the Nasdaq, quotation of
Monitronics common stock on the OTC Markets following the
restructuring and proposed merger, business strategies, anticipated
sources and uses of capital, future financial prospects and other
matters that are not historical facts. These forward-looking
statements involve many risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by such statements, including, without limitation, the inability to
complete the proposed merger due to the failure to obtain the
requisite approvals or the failure to satisfy other conditions to
completion of the proposed merger, including that a governmental
entity may prohibit, delay or refuse to grant approval for the
consummation of the proposed merger, the Plan, or the
restructuring; risks related to disruption of management’s
attention from ongoing business operations due to the proposed
merger, the Chapter 11 Cases to be filed by Monitronics and its
domestic subsidiaries or the restructuring; and the effects of
future litigation, including litigation relating to the proposed
merger, the Chapter 11 Cases or the restructuring. Forward-looking
statements can be affected by assumptions used or by known or
unknown risks or uncertainties. Consequently, no forward-looking
statements can be guaranteed. These forward-looking statements
speak only as of the date of this communication, and Ascent and
Monitronics expressly disclaim any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in Ascent's or
Monitronics’ expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based. Please refer to the publicly filed documents of Ascent and
Monitronics, including the most recent Forms 10-K and 10-Q for
additional information about Ascent and Monitronics and about the
risks and uncertainties related to Ascent's and Monitronics’
respective business which may affect the statements made in this
communication.
Additional Information
Nothing in this communication shall constitute a solicitation to
buy or an offer to sell any securities of Ascent or Monitronics.
Ascent stockholders and other investors are urged to read the proxy
statement/prospectus forming a part of the Registration Statement
on Form S-4 regarding the proposed merger of Ascent and Monitronics
and any other relevant documents to be filed with the SEC, as well
as any amendments or supplements to those documents, because they
will contain important information about the proposed merger and
the transactions contemplated by the Support Agreement. Copies of
Ascent’s and Monitronics’ SEC filings are available free of charge
at the SEC’s website (http://www.sec.gov). Copies of the filings
together with the materials incorporated by reference therein will
also be available, without charge, by directing a request to
Monitronics International, Inc., 1990 Wittington Place, Farmers
Branch, TX, Telephone: (972) 243-7443, or to Ascent Capital Group,
Inc., 5251 DTC Parkway. Suite 1000, Greenwood Village, CO 80111,
Telephone: (303) 628-5600.
Participants in the Solicitation
The directors and executive officers of Ascent and Monitronics
and other persons may be deemed to be participants in the
solicitation of proxies in respect of any proposals relating to the
proposed merger of Ascent and Monitronics. Information regarding
the directors and executive officers of Ascent is available in
Amendment No. 1 to its Annual Report on Form 10-K for the year
ended December 31, 2018, which has been filed with the SEC, and
certain of its Current Reports on Form 8-K. Information
regarding the directors and executive officers of Monitronics will
be available in the proxy statement/prospectus forming a part of
the Registration Statement on Form S-4 regarding the proposed
merger and other transactions contemplated by the Support Agreement
to be filed with the SEC. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
will be available in the proxy materials regarding the foregoing to
be filed with the SEC. Free copies of these documents may be
obtained as described in the preceding paragraph.
About Ascent and Monitronics
Ascent Capital Group, Inc. (Nasdaq: ASCMA) is a holding company
whose primary subsidiary is Monitronics, one of the largest home
security and alarm monitoring companies in the U.S. Headquartered
in the Dallas-Fort Worth area, Monitronics secures approximately
900,000 residential and commercial customers through highly
responsive, simple security solutions backed by expertly trained
professionals. The company has the nation’s largest network of
independent authorized dealers – providing products and support to
customers in the U.S., Canada and Puerto Rico – as well as
direct-to-consumer sales of DIY and professionally installed
products. For more information on Ascent, see
http://ir.ascentcapitalgroupinc.com.
Investor Contact
Erica Bartsch Sloane &
Company212-446-1875ebartsch@sloanepr.com
Media Contact
Sarah RosseletFTI Consulting
Inc.312-428-2638Sarah.Rosselet@fticonsulting.com
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