StoneMor Partners L.P. (NYSE: STON) (“StoneMor” or the
“Partnership”), a leading owner and operator of 322
cemeteries and 91 funeral homes in 27 states and Puerto Rico, today
announced that it has closed a $447.5 million recapitalization
transaction, consisting of (i) a private placement of $385.0
million of 9.875% Senior Secured PIK Toggle Notes due 2024 (the
“
Senior Secured Notes”) of the Partnership to
certain financial institutions (the “
Senior Secured Notes
Private Placement”); and (ii) a concurrent private
placement of $62.5 million of liquidation value of Series A
Convertible Preferred Units of the Partnership (the “
Series
A Preferred Units”) to Axar Capital Management LP
(“
Axar”) and certain other investors
(collectively, the “
Series A Purchasers”) at a
price of $1.1040 per Series A Preferred Unit, resulting in gross
proceeds of $57.5 million and reflecting an 8% discount to the
$1.20 per unit liquidation value of the Series A Preferred Units
(the “
Series A Preferred Unit Private Placement”).
The Series A Preferred Units were executed as a private
placement to enable a timely closing of the recapitalization to
occur before June 30, 2019. The 52,083,333 Series A Preferred
Units are convertible into common units on a share-for share-basis,
subject to certain anti-dilution adjustments. Up to
33,487,904 of the Series A Preferred Units are redeemable by the
Partnership out of the proceeds of a planned rights offering
(described below) of at least $40.185 million of common units to be
sold at $1.20 per unit to existing holders. The net proceeds
of the Senior Secured Notes and the Series A Preferred Units have
been used to fully repay the Partnership’s outstanding senior notes
due in June 2021 and retire the Partnership’s revolving credit
facility due in May 2020, as well as for associated transaction
expenses with the balance available for general corporate purposes.
Immediately prior to and as a condition precedent to the
recapitalization transactions, the Board of Directors of StoneMor
GP LLC was reconstituted to comprise seven members, three of whom
have been designated by Axar. Andrew Axelrod, the founder and
managing partner of Axar, has been named Chairman of the Board of
Directors.
Joe Redling, StoneMor’s President and Chief Executive Officer,
said, “We are excited to announce this transformative
transaction. The recapitalization of our balance sheet resets
the financial footing of StoneMor and positions us to execute our
business strategy. We believe this debt refinancing
demonstrates both strong underlying values of our asset base, as
well as confidence in the Company’s ability to execute its
turnaround plan. We have now also filled our key senior
management roles, including a CFO experienced in operational
turnarounds, we have aligned our strategic goals and we are now
improving StoneMor’s corporate governance with a reconstituted
Board of Directors. With this transaction completed, we now
have sufficient liquidity to continue the turnaround that we
initiated in the fourth quarter of 2018.”
Redling continued “This refinancing, together with our cost
structure and performance improvement efforts and our contemplated
corporate transition are important steps to revitalizing StoneMor’s
business and positioning it for future success. We look
forward to completing our planned corporate C-Corp conversion
following completion of the rights offering. We believe this
transaction helps ensure that StoneMor will continue to provide the
families and communities we serve with the highest level of
support. Honoring the life stories of our customers is our mission
and we will continue to dedicate our efforts to deliver on that
promise each and every day. We are grateful for the continued
support of Axar Capital Management, as evidenced by its significant
investment in our Series A Preferred Units, as we continue our
efforts to enhance shareholder value.”
Senior Secured Notes Private
Placement
The Partnership and Cornerstone Family Services of West Virginia
Subsidiary, Inc. (together with the Partnership, the “Issuers”)
issued an aggregate principal amount of $385.0 million of Senior
Secured Notes pursuant to an indenture, dated as of June 27, 2019.
The Issuers will pay interest at either a fixed rate of
9.875% per annum in cash or, at their periodic option through
January 30, 2022, a fixed rate of 7.50% per annum in cash plus a
fixed rate of 4.00% per annum payable in kind. The Senior
Secured Notes were issued at a price equal to 96.5% of par.
Interest is payable quarterly in arrears on the 30th day of each
March, June, September and December, commencing September 30,
2019. The Senior Secured Notes mature on June 30, 2024.
The Issuers’ obligations under the Senior Secured Notes are
jointly and severally guaranteed by substantially all of the direct
and indirect subsidiaries of the Partnership (the
“Guarantees”). In addition, the Issuers’ obligations under
the Senior Secured Notes Indenture and the Senior Secured Notes,
including the Guarantees are secured by a first priority lien and
security interest (subject to permitted liens and security
interests) in substantially all of the Issuers’ and the guarantors’
assets, whether now owned or hereafter acquired. The Issuers also
entered into a registration rights agreement for the benefit of the
purchasers of the Senior Secured Notes.
The Senior Secured Notes were sold in a transaction not subject
to the registration requirements of the United States Securities
Act of 1933, as amended (the “Securities Act”) and
may not be reoffered or resold in the United States without
registration under the Securities Act or pursuant to an applicable
exemption from, or in a transaction not subject to such
registration requirements.
Series A Preferred Unit Private Placement
The Series A Preferred Units were sold pursuant to the Series A
Preferred Unit Purchase Agreement (the “Series A Purchase
Agreement”) and rank senior to all existing limited
partner interests in the Partnership. They are convertible at
a 1:1 ratio (subject to anti-dilution adjustments) (i) at the
option of the holder into common units of the Partnership at any
time commencing 10 days following the completion of the
Partnership’s contemplated rights offering (as described below), or
(ii) automatically into shares of common stock of StoneMor Inc.,
immediately upon the completion of the previously-announced
conversion of StoneMor group into corporate form. The Series
A Preferred Units will participate in voting and distributions with
the common units on an as-converted basis and will be entitled to a
liquidation preference of $1.20 per Series A Preferred Unit upon
any liquidation, dissolution or winding up of the Partnership.
Pursuant to the Series A Preferred Purchase Agreement, the
Partnership agreed to undertake an offering to holders of Common
Units (other than to the Series A Purchasers, American
Infrastructure Funds and their respective affiliates) of the
non-transferable, right to purchase their pro rata share of at
least $40.2 million of additional Common Units at a price of $1.20
per common unit, and use the proceeds of the rights offering to
redeem up to 33,487,904 of Series A Preferred Units from the
Purchasers, at a price of $1.20 per Series A Preferred Unit.
In connection with the Series A Preferred Unit Private
Placement, the Board of Directors of the Partnership’s general
partner, StoneMor GP LLC (the “General Partner”)
was reconstituted to a 7-member board consisting of three designees
of Axar: Andrew Axelrod, David Miller and Spencer Goldenberg; one
designee of StoneMor GP Holdings LLC (the “GP
Holdco”): Robert Hellman; two continuing independent
directors, Patricia Wellenbach and Stephen Negrotti; and Joe
Redling, the General Partner’s Chief Executive Officer. In
addition, the Partnership entered into an agreement with the Series
A Purchasers to provide registration rights for the common units of
the Partnership or shares of common stock of StoneMor Inc. into
which the Series A Preferred Units will convert.
Garry Herdler, StoneMor’s Senior Vice President and Chief
Financial Officer, commented, “When I was hired in April 2019, we
outlined a turnaround strategy focused on four key goals: cash flow
and liquidity, capital structure, strategic balance sheet/portfolio
review, and performance improvement from cost reductions and
revenue enhancement. We closed this $447.5 million debt and
equity recapitalization within 75 days of my start, with both new
and existing investors. This completes a major milestone in
this strategy as it delivers initial progress on the first two of
the four goals within our initial 100-day plan – it significantly
extends the debt capital structure with a five-year maturity and it
provides StoneMor with a meaningful liquidity improvement now to
execute our turnaround strategy, including the next phase of our
performance improvement plans.”
Herdler continued “While it is still early in the turnaround, we
believe we have also identified significant expense reduction
opportunities, elements of which we will discuss in more detail on
the investor call scheduled with this announcement. In our
first quarter earnings release, we stated that we believe other
cost reduction and performance improvement opportunities
existed. We have now also identified the next phase of this
operational turnaround strategy with additional “4-wall level”
operational savings, identified projects and industry benchmarking,
including prioritizing opportunities in procurement, sourcing,
product hierarchy, field labor efficiencies, shared services and
outsourcing. Lastly, we continue to be on track to deliver
our second fiscal quarter financial results, on time, in August
2019.”
Recapitalization Transaction Investor Call
The Partnership will conduct a conference call to discuss the
recapitalization transactions tomorrow, Friday, June 28, 2019 at
8:30 a.m. ET. The Company plans to provide slides on the
discussion topics on its website for participants on the call and
also anticipates furnishing those materials as an exhibit to a
Current Report on Form 8-K it will file with the Securities and
Exchange Commission (the “SEC”). The conference call can be
accessed by calling 800-954-0620. The live webcast of the
conference call will also be available to investors who may access
the call through the investors section of www.stonemor.com.
The webcast and audio replay will also be archived on the
Partnership’s website at www.stonemor.com.
This announcement is for informational purposes only and does
not constitute an offer to sell, or a solicitation of an offer to
buy, any security and does not constitute an offer, solicitation or
sale of any security in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
About StoneMor Partners L.P.
StoneMor Partners L.P., headquartered in Trevose, Pennsylvania,
is an owner and operator of cemeteries and funeral homes in the
United States, with 322 cemeteries and 91 funeral homes in 27
states and Puerto Rico.
StoneMor’s cemetery products and services, which are sold on
both a pre-need (before death) and at-need (at death) basis,
include: burial lots, lawn and mausoleum crypts, burial vaults,
caskets, memorials, and all services which provide for the
installation of this merchandise. For additional information about
StoneMor Partners L.P., please visit StoneMor’s website, and the
investors section, at http://www.stonemor.com.
Important Information for Investors and
Unitholders
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval.
In connection with the proposed rights offering, StoneMor
Partners, L.P. (the “Partnership”) will file a registration
statement and prospectus with the Securities and Exchange
Commission (the “SEC”). Any offer of common units pursuant to
such rights offering will be made solely pursuant to the prospectus
for the rights offering and following the effectiveness of such
registration statement.
In connection with the proposed reorganization, StoneMor GP LLC
(to be converted into a corporation named StoneMor Inc.
(“StoneMor GP”)) and the Partnership will jointly
file with the SEC a registration statement on Form S-4, which will
include a prospectus of StoneMor GP and a proxy statement of the
Partnership. StoneMor GP and the Partnership also plan to
file other documents with the SEC regarding the proposed
transaction. After the registration statement has been declared
effective by the SEC, a definitive joint proxy statement/prospectus
will be mailed to the unitholders of the Partnership. INVESTORS AND
UNITHOLDERS OF THE PARTNERSHIP ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS
THERETO) AND OTHER DOCUMENTS RELATING TO THE PROPOSED
REORGANIZATION THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN
THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED REORGANIZATION. Investors
and unitholders will be able to obtain free copies of the joint
proxy statement/prospectus and other documents containing important
information about StoneMor GP and the Partnership once such
documents are filed with the SEC, through the website maintained by
the SEC at http://www.sec.gov. Copies of the documents filed
with the SEC by the Partnership will be available free of charge on
their internet website at www.stonemor.com or by
contacting their Investor Relations Department at (215)
826-2945.
Cautionary Note Regarding Forward-Looking
Statements
Certain statements contained in this press release, including,
but not limited to, information regarding the Partnership’s
contemplated rights offering and transition to a corporate
structure, as well as continued performance and cost structure
improvement efforts undertaken by the Partnership, are
forward-looking statements. Generally, the words “believe,” “may,”
“will,” “estimate,” “continue,” “anticipate,” “intend,” “project,”
“expect,” “predict” and similar expressions identify these
forward-looking statements. These statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995.
Forward-looking statements are based on management’s current
expectations and estimates. These statements are neither promises
nor guarantees and are made subject to certain risks and
uncertainties that could cause actual results to differ materially
from the results stated or implied in this press release.
StoneMor’s major risks are related to uncertainties associated with
the cash flow from pre-need and at-need sales, trusts and
financings, which may impact StoneMor’s ability to meet its
financial projections, service its debt and resume paying
distributions, with the proposed merger and whether and when the
transactions contemplated by the merger and reorganization
agreement will be consummated, as well as with StoneMor’s ability
to maintain an effective system of internal control over financial
reporting and disclosure controls and procedures.
StoneMor’s additional risks and uncertainties include, but are
not limited to: uncertainties associated with future revenue and
revenue growth; uncertainties associated with the integration or
anticipated benefits of recent acquisitions or any future
acquisitions; StoneMor’s ability to successfully implement its
strategic plan relating to achieving operating improvements,
including improving sales productivity and reducing operating
expenses; the effect of economic downturns; the impact of
StoneMor’s significant leverage on its operating plans; the decline
in the fair value of certain equity and debt securities held in
StoneMor’s trusts; StoneMor’s ability to attract, train and retain
an adequate number of sales people; uncertainties associated with
the volume and timing of pre-need sales of cemetery services and
products; increased use of cremation; changes in the death rate;
changes in the political or regulatory environments, including
potential changes in tax accounting and trusting policies;
StoneMor’s ability to successfully compete in the cemetery and
funeral home industry; litigation or legal proceedings that could
expose StoneMor to significant liabilities and damage StoneMor’s
reputation, including but not limited to litigation and
governmental investigations or proceedings arising out of or
related to accounting and financial reporting matters; the effects
of cyber security attacks due to StoneMor’s significant reliance on
information technology; uncertainties relating to the financial
condition of third-party insurance companies that fund StoneMor’s
pre-need funeral contracts; and various other uncertainties
associated with the death care industry and StoneMor’s operations
in particular.
When considering forward-looking statements, you should keep in
mind the risk factors and other cautionary statements set forth in
StoneMor’s Annual Report on Form 10-K and the other reports that
StoneMor files with the Securities and Exchange Commission, from
time to time. Except as required under applicable law, StoneMor
assumes no obligation to update or revise any forward-looking
statements made herein or any other forward-looking statements made
by it, whether as a result of new information, future events or
otherwise.
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CONTACT: |
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John McNamara |
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Director - Investor
Relations |
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StoneMor Partners L.P. |
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(215) 826-2945 |
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