Monitronics International, Inc. (“Monitronics” or “the Company”),
the wholly owned subsidiary of Ascent Capital Group, Inc.
(“Ascent”) (NASDAQ: ASCMA), today announced that it has voluntarily
initiated its previously announced planned financial restructuring
under Chapter 11 of the U.S. Bankruptcy Code to effectuate its
partially pre-packaged Plan of Reorganization (the “Plan”).
Under the terms of the proposed Plan, which now has the support
of holders of approximately 91 percent in amount of the Company’s
secured term loans and holders of approximately 81 percent in
amount of its senior unsecured notes, the Company will eliminate
approximately $885 million in debt and emerge from Chapter 11 in
approximately 75 days with what it believes is the strongest
balance sheet in its industry. The case will be heard in the U.S.
Bankruptcy Court for the Southern District of Texas.
Monitronics expects to continue to operate its business in the
ordinary course throughout the restructuring. The Company has filed
the customary first day motions to ensure its continued ability to
provide powerful home security to customers without interruption
while meeting its commitments to employees, partner dealers,
suppliers and other business partners. Additionally, the Company
has secured a commitment for $245 million in debtor-in-possession
(DIP) financing, which will be replaced by $295 million in exit
financing at the completion of the reorganization to ensure the
Company is able to execute on its strategic plan.
“We believe that our Plan of Reorganization gives us the
strongest balance sheet in our industry – an enviable financial
position that allows us to accelerate our growth and emerge as a
stronger provider, employer and partner,” said Jeffery Gardner,
President and Chief Executive Officer of Monitronics. “Today’s
Chapter 11 filing puts us one step closer to achieving our
financial goals and, importantly, does so in way that ensures our
continued ability to operate our business as usual and honor our
financial commitments. I want to express my appreciation for the
continued focus and commitment of the entire Monitronics team as
well as the loyalty of our dealers, sales representatives, vendors
and financial partners who have supported us through this process.
We look forward to an even brighter future together.”
Under the terms of the proposed Plan, up to approximately $685
million of debt will be converted to equity, including up to
approximately $585 million aggregate principal amount of the
Company’s 9.125% Senior Notes due 2020 and $100 million of the
Company’s term loans. The Company also expects to receive $177
million in proceeds through an equity rights offering, and an
additional $23 million from either Ascent in connection with the
previously announced merger into Monitronics (the “Merger”) or
through a “backstop” commitment from certain of its noteholders.
This cash will be used to, among other things, repay term and
revolving loan debt.
Following the completion of the restructuring, the Company is
expected to have approximately $990 million of total debt.
Recurring monthly revenue (“RMR”) as of May 30, 2019, was $40.1
million.
Concurrent with the completion of the reorganization of
Monitronics under the Plan, subject to certain conditions
(including the receipt of the requisite approval of Ascent’s
stockholders), Ascent anticipates that it will consummate the
Merger. As a result of the Merger, all assets of Ascent,
including up to $23 million in cash (the “Target Cash Amount”),
will become assets of Monitronics. Upon consummation of the Merger,
Ascent’s stockholders are expected to receive up to approximately
5.82% (assuming the Target Cash Amount is $23 million) of the total
shares of Monitronics common stock expected to be issued and
outstanding following the consummation of the Plan and the Merger,
in exchange for all then issued and outstanding shares of Ascent
common stock, subject to dilution under a management incentive plan
for the Company. If, however, Ascent is expected to hold $20
million or more in cash, but less than the Target Cash Amount upon
consummation of the Plan, the stockholders of Ascent will receive a
proportionately lower percentage of shares of Monitronics common
stock, and certain of the Company’s noteholders have agreed to
contribute the shortfall. If Ascent is expected to hold less than
$20 million in cash upon consummation of the Plan, the Merger will
not occur, certain noteholders will contribute the Target Cash
Amount and Ascent will be obligated to make a cash contribution to
Monitronics in the amount of $3.5 million. Additional
information regarding the exchange ratio to be applied in the
Merger and the potential consequences of Ascent failing to
participate in the Merger was set forth in a registration statement
filed with the Securities and Exchange Commission (the “SEC”) on
May 24, 2019.
Under the terms of a Restructuring Support Agreement entered
into by Ascent, Monitronics and certain creditors of Monitronics
(as amended, the “Support Agreement”), Ascent must obtain approval
for the Merger from its stockholders within 63 days of the
commencement of Monitronics' Chapter 11 Cases on June 30, 2019
(“Petition Date”). If the Merger is not approved within 63 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 will be obligated to make a $3.5
million cash contribution to Monitronics and Ascent’s equity
interests in Monitronics will be 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, “We continue to believe the completion of this debt
restructuring, with the participation of Ascent, is the best
opportunity for our stockholders to maximize the value of their
holdings – both at present and as part of a stronger and more
competitive go-forward business. We look forward to efficiently
completing these last steps in the restructuring process for the
benefit of all our stakeholders.”
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,
an application has been made to have the shares of Monitronics
common stock to be issued in the Merger approved for quotation on
the OTC Markets.
Additional information about the Chapter 11 case and claims
information can be found at
https://cases.primeclerk.com/monitronics.
Monitronics is represented in this matter by Latham &
Watkins LLP, King & Spalding 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 that have been 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 is
set forth in the proxy statement/prospectus forming a part of the
Registration Statement on Form S-4 that has been filed with the SEC
regarding the proposed merger and other transactions contemplated
by the Support Agreement . Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
is available in the proxy materials regarding the foregoing
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 &
Company212-486-9500ebartsch@sloanepr.com
Media Contact
Sarah RosseletFTI Consulting
Inc.312-428-2638Sarah.Rosselet@fticonsulting.com
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