UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of Earliest Event Reported): November 17,
2020
Gannett Co., Inc.
(Exact Name of Registrant as Specified in Its Charter)
Registrant’s telephone number, including area code:
703-854-6000
Former name or former address, if changed since last report: Not
Applicable
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
On November 17, 2020, Gannett Co., Inc. (the “Company”) entered
into an Exchange Agreement (the “Exchange Agreement”) with certain
of the lenders (the “Exchanging Lenders”) under the Company’s
senior secured 11.5% term loan Credit Agreement dated November 19,
2019 (the “Credit Agreement”) pursuant to which the Company and the
Exchanging Lenders agreed to exchange approximately $500 million in
aggregate principal amount of the Company’s newly issued 6% Senior
Secured Convertible Notes due 2027 (the “Notes”) for the retirement
of an equal amount of term loans under the Credit Agreement (the
“Exchange”). Following the Exchange, the remaining term loan
will have an outstanding principal balance of $1.118 billion (the
“Remaining Term Loan”). The Notes were issued pursuant to an
Indenture (the “Indenture”) dated as of November 17, 2020, between
the Company and U.S. Bank National Association, as trustee.
In connection with the Exchange, the Company entered into an
Investor Agreement (the “Investor Agreement”) with the holders of
the Notes (the “Holders”) establishing certain terms and conditions
concerning the rights and restrictions on the Holders with respect
to the Holders’ ownership of the Notes. The Company also
entered into an amendment to the Registration Rights Agreement
dated November 19, 2019 between the Company and FIG LLC. In
addition, the Remaining Term
Loan will be amended as described below (the
“Amendment”).
Notes and Indenture
The Notes are guaranteed by Gannett Holdings LLC and any
subsidiaries of the Company (collectively, the “Guarantors”) that
guarantee the Remaining Term Loan. The Notes will be secured
by the same collateral securing the Remaining Term Loan. The
Notes rank as senior secured debt of the Company, with the
following collateral priorities: (i) prior to a Permitted
Refinancing (as defined in the Indenture) of all remaining
indebtedness under the Remaining Term Loan with new first lien debt
that meets the requirements of a Refinancing Facility (as defined
in the Indenture), including, among other things, that (a) the
principal amount of the new debt does not exceed the balance of the
Remaining Term Loan (plus interest and fees), (b) the all-in-yield
of the new debt does not exceed 9.5% per annum and (c) the other
terms of the new debt are no less favorable to the Company, the
Notes and Remaining Term Loan will share in the collateral under
the Remaining Term Loan on a pari passu basis; and (ii) following
any Permitted Refinancing, the Notes will be secured by a second
priority lien on the same collateral package securing the
indebtedness incurred in connection with the Permitted
Refinancing.
The Company will pay interest on the Notes at an annual rate of
6.000% payable on June 1 and December 1 of each year, beginning on
June 1, 2021. The Notes will mature on December 1, 2027,
unless earlier repurchased or converted.
Each Note is convertible into that number of shares of common stock
(“Common Stock”) of the Company equal to $1,000 divided by the
Conversion Price (the “Conversion Rate”). The Notes may be
converted at any time by the holders into cash, shares of the
Company’s common stock (“Common Stock”) or any combination of cash
and Common Stock, at the Company’s election, based on an initial
conversion rate of 200 shares of Common Stock per $1,000 principal
amount of the Notes (which is equal to a conversion price of $5.00
per share of Common Stock (the “Conversion Price”), representing a
conversion premium of approximately 187% based on the closing price
of $1.74 per share of Common Stock on November 16, 2020).
The conversion rate is subject to customary adjustment provisions
as provided in the Indenture. In addition, the conversion
rate will be subject to adjustment in the event of any issuance or
sale of Common Stock (or securities convertible into Common Stock)
at a price equal to or less than the Conversion Price in order to
ensure that following such issuance or sale, the Notes would be
convertible into approximately 42% of the Common Stock after giving
effect to such issuance or sale (assuming the initial principal
amount of the Notes remains outstanding).
If a “Make-Whole Fundamental Change” (as defined in the Indenture)
occurs, the Company will in certain circumstances increase the
conversion rate for a specified period of time. If a
“Fundamental Change” (as defined in the Indenture) occurs, the
Company will be required to offer to repurchase the Notes at a
repurchase price of 110% of the principal amount thereof.
Until the four-year anniversary of the issuance date, the Company
will have the right to redeem for cash up to approximately $100
million of the Notes at a redemption price of 130% of the principal
amount thereof, with such amount reduced ratably by any principal
amount of Notes that has been converted by the holders or redeemed
or purchased by the Company.
Following an Event of Default (as defined in the Indenture), the
Notes will be subject to an “asset sale” sweep, “excess cash flow”
sweep and “unrestricted cash” sweep substantially identical to the
corresponding provisions in the Remaining Term Loan.
Mandatory prepayments pursuant to these provisions will be shared
ratably between holders of the Notes and holders of the Remaining
Term Loan as provided in the Indenture and related intercreditor
agreements.
Holders of the Notes will have the right to put up to approximately
$100 million of the Notes at par, (a) for as long as the Remaining
Term Loan remains outstanding, on or after the fourth anniversary
of the issuance date, or (b) after a Permitted Refinancing, on or
after the date that is 91 days after the maturity date of such
Permitted Refinancing.
The Company may refinance the Remaining Term Loan with new first
lien debt, as long as the new first lien debt satisfies the
requirements of a Permitted Refinancing. In the event that
the Company proposes to enter into a Permitted Refinancing, Holders
of the Notes will have the option to require the Company to
repurchase their Notes at a price equal to 101.5% of par, which
amount will increase by 1.5% on each three month anniversary of the
issuance date of the Notes. The Indenture permits the Company
to raise additional first lien or second lien debt to finance any
such repurchases, subject to certain conditions set forth
therein.
Before paying a dividend, unless the Company’s pro forma Total
Gross Leverage Ratio (as defined in the Indenture) is less than
1.50x, the Company must offer to redeem an aggregate principal
amount of Notes equal to the proposed amount of such dividend at a
redemption price equal to the principal amount thereof. To the
extent the redemption offer is not required by the Indenture or is
rejected by the noteholders, the Company may pay the dividend,
subject to a customary adjustment to the conversion rate.
The Indenture includes affirmative and negative covenants that are
substantially consistent with the Remaining Term Loan, as well as
customary events of default.
The issuance of the Notes in connection with the Exchange was
effectuated through a private placement in reliance upon the
exemption from registration provided by Section 4(a)(2) of the
Securities Act of 1933, as amended (the “Securities Act”), in
transactions not involving any public offering.
The issuance of Common Stock upon conversion of the Notes is
subject to approval of the Company’s stockholders pursuant to Rule
312 of the Listed Company Manual of the New York Stock
Exchange. As promptly as practicable after the issuance date
(and in any event within 30 business days after the issuance date),
the Company will prepare and file a proxy statement with the
Securities and Exchange Commission that includes a proposal for the
Company’s shareholders to approve the issuance of Common Stock upon
conversion of the Notes as required under the rules and regulations
of the New York Stock Exchange (the “Full Conversion”) at a special
meeting of the Company’s shareholders, which will be held as soon
as possible after the issuance date. Subject to the
directors’ fiduciary duties, the proxy statement will include a
recommendation from the Board that the shareholders vote in favor
of the Full Conversion. If the required shareholder approval
is not obtained, (1) the Company will seek shareholder approval of
the Full Conversion at the Company’s 2021 annual meeting and (2)
the Notes that would upon conversion into Common Stock represent
more than 19.9% of the existing total Common Stock of the Company
will be convertible into cash only, until such shareholder approval
is received. If, on the one-year anniversary of the issuance
date, the shareholders have not received approval and the Remaining
Term Loan is still outstanding, the coupon of the Notes will
increase by 1.50% and the Required Amortization will be adjusted
accordingly. If, on the two-year anniversary of the issuance date,
the shareholders have not received approval and the Remaining Term
Loan is still outstanding, the coupon will increase by an
additional 1.50% and the Required Amortization will be adjusted
accordingly.
The foregoing description of the Notes, the Indenture and the
Exchange Agreement does not purport to be complete and is qualified
in its entirety by reference to the Indenture filed herewith as
Exhibit 4.1, and to the Exchange Agreement filed herewith as
Exhibit 10.1, to this Current Report on Form 8-K and incorporated
herein by reference.
Investor Agreement
Until the date that a Holder no longer has, or has otherwise
irrevocably waived, the right to designate one or more directors
for nomination or appointment to the Board of the Company (the
“Board”) pursuant to the Remaining Term Loan and no such director
is serving on the Board (the “Standstill Period”), if such Holder
(individually or as a “group” (as defined under the Securities
Exchange Act of 1934, as amended)) directly or indirectly
beneficially owns 10% or more of the aggregate amount of Common
Stock issued or issuable upon conversion of the Notes (assuming
that all Notes are fully converted into and settled in Common Stock
as of the time of such determination), then such Holder will be
subject to customary standstill restrictions, subject to certain
exceptions, as provided in the Investor Agreement.
During the Standstill Period, each Holder that beneficially owns
shares of Common Stock issued upon conversion of the Notes that
represent 10% or greater of the then outstanding Common Stock of
the Company agrees to vote any such shares in favor of the
Company’s director nominees included in the Company’s proxy
statement. Until the earlier of (x) the expiration of the
Standstill Period and (y) eighteen months after the issuance date,
no Holder or “group” (as defined under the Securities Exchange Act
of 1934, as amended) of Holders may vote any shares of Common Stock
in excess of 20% of the then outstanding Common Stock of the
Company.
The Holders of the Notes will be entitled to customary registration
rights with respect to their as-converted Common Stock (subject to
minimum registration amounts, blackout periods and limitations on
the number of demands) following the 30-day anniversary of the
closing date.
The foregoing description of the Investor Agreement does not
purport to be complete and is qualified in its entirety by
reference to the Investor Agreement filed herewith as Exhibit 10.2
to this Current Report on Form 8-K and incorporated herein by
reference.
Amendment to Existing Registration Rights Agreement
In connection with the Investor Agreement, the Company entered into
an amendment with FIG LLC to the Registration Rights Agreement
dated November 19, 2019 (as amended, the “Existing Registration
Rights Agreement”) in order to account for the registration rights
being granted to the Holders pursuant to the Investment
Agreement.
The foregoing description of the Existing Registration Rights
Agreement does not purport to be complete and is qualified in its
entirety by reference to the Existing Registration Rights Agreement
filed herewith as Exhibit 10.3 to this Current Report on Form 8-K
and incorporated herein by reference.
Amendment to Credit Agreement
In connection with the Exchange, the Company, the Guarantors, Alter
Domus Products Corp., as administrative agent and collateral agent,
and the lenders under the Credit Agreement have executed the
Amendment, which, among other things, (i) requires quarterly
amortization payments in an amount equal to the interest rate
savings resulting from the Exchange for the applicable quarter,
(ii) increases the threshold under the requirement for prepayment
of the term loans with unrestricted cash and cash equivalents in
excess of $40,000,000 from $40,000,000 to $70,000,000 for the 2020
fiscal year and (iii) replaces the Specified Lender’s (as defined
therein) right to appoint directors to the Board in the event the
gross leverage ratio exceeds certain thresholds with the right to
increase the size of the board of directors and to nominate
directors for election to the Board in the event the gross leverage
ratio exceeds such thresholds.
The foregoing description of the Amendment does not purport to be
complete and is qualified in its entirety by reference to the
Amendment filed herewith as Exhibit 10.4 to this Current Report on
Form 8-K and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
