Item 1.01
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Entry Into a Material Definitive Agreement.
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On April 1, 2020, StoneMor Partners L.P., a Delaware limited partnership (the “Partnership”), Cornerstone Family Services of West Virginia Subsidiary, Inc., a West Virginia corporation (“Cornerstone” and, collectively with the Partnership, the “Issuers”) and Wilmington Trust, National Association, as trustee, entered into the Third Supplemental Indenture (the “Supplemental Indenture”) to the indenture dated June 27, 2019 (the “Indenture”) with respect to the 9.875%/11.500% Senior Secured PIK Toggle Notes due 2024 (the “Notes”). Pursuant to the terms of the Supplemental Indenture:
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1.
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The following financial covenants were amended:
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a.The Interest Coverage Ratio measurements at March 31, June 30 and September 30, 2020 were eliminated and replaced with a Minimum Operating Cash Flow covenant of $(25.0 million), $(35.0 million) and $(35.0 million), respectively;
b.The required Interest Coverage Ratios at December 31, 2020, March 31, 2021 and June 30, 2021 were reduced to 0.00x, 0.75x and 1.10x, respectively, from 1.15x, 1.25x and 1.30x; and
c.The Asset Coverage tests at March 31, June 30, September 30 and December 31, 2020 were reduced to 1.40x from 1.60x;
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2.
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The premium payable upon voluntary redemption of the Notes on or after June 27, 2021 and before June 27, 2022 was increased from 4.0% to 5.0% and the premium payable upon any such voluntary redemption on or after June 27, 2022 and before June 27, 2023 was increased from 2.0% to 3.0%; and
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3.
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The Issuers agreed to use their best efforts to cause StoneMor, Inc. (the “Company”) to effectuate a rights offering on the terms described below as promptly as practicable with an expiration date no later than July 24, 2020 and to receive proceeds of not less than $8.2 million therefrom (in addition to the $8.8 million capital raise described below).
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The foregoing amendments effected by the Supplemental Indenture will become operational when the Company raises an initial $8.8 million of equity capital, pays a $5 million consent fee to the holders of the Notes, of which $3.5 million will be paid in cash and $1.5 million will be paid by increasing the principal amount of the Notes outstanding, and satisfies other specified conditions.
Concurrently with the execution of the Supplemental Indenture, the Company entered into a letter agreement (the “Axar Commitment”) with Axar Capital Management, LP (“Axar”) pursuant to which Axar committed to (a) purchase shares of the Company’s Series A Preferred Stock with an aggregate purchase price of $8.8 million on April 3, 2020, (b) exercise its basic rights in the rights offering by tendering the shares of Series A Preferred Stock so purchased for shares of Common Stock and (c) purchasing any shares offered in the rights offering for which other stockholders do not exercise their rights, up to a maximum of an additional $8.2 million of such shares. The Company is not paying Axar any commitment, backstop or other fees in connection with the Axar Commitment.
Under the terms of the Supplemental Indenture and the Axar Commitment, the Company agreed to undertake an offering to holders of its Common Stock of transferable rights to purchase their pro rata share of shares of Common Stock with an aggregate exercise price of at least $17 million at a price of $0.73 per share. The rights offering period, during which the rights will be transferable, will be no less than 20 calendar days and no more than 45 calendar days. The Company agreed to use its best efforts to complete the rights offering with an expiration date no later than July 24, 2020.
The foregoing descriptions of the Supplemental Indenture and the Axar Commitment do not purport to be complete and are subject to, and qualified in their entirety by reference to, the full text of the Supplemental Indenture and the Axar Commitment, copies of which are included as Exhibit 4.1 and Exhibit 10.1, respectively, to this Current Report on Form 8-K and are hereby incorporated herein by reference.
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