Uniti Group Inc. (the “Company”, “Uniti”, or “we”) (Nasdaq: UNIT)
today announced that it intends to offer, subject to market and
other conditions, $300 million aggregate principal amount of
convertible senior notes due 2027 (the “Convertible Notes”).
The Company also intends to grant to the initial
purchasers of the Convertible Notes an option to purchase up to an
additional $45 million aggregate principal amount of the
Convertible Notes during a 13-day period beginning on, and
including, the first day on which the Convertible Notes are
issued.
The Convertible Notes will be general senior
unsecured obligations of the Company, guaranteed by each of the
Company’s subsidiaries that is an issuer, obligor or guarantor
under its existing senior notes other than certain regulated
subsidiaries that the Company expects will guarantee the
Convertible Notes after the closing of the offering.
The Convertible Notes will mature on December 1,
2027, unless earlier repurchased, redeemed or converted. Prior to
September 1, 2027, the Convertible Notes will be convertible only
upon satisfaction of certain conditions and during certain periods,
and thereafter, the Convertible Notes will be convertible at any
time until the close of business on the second scheduled trading
day immediately preceding the maturity date. The Convertible Notes
will be convertible on the terms set forth in the indenture into
cash, shares of common stock of the Company (the “Common Stock”),
or a combination thereof, at the Company’s election.
The Company may redeem all or a portion of the
Convertible Notes, at any time, at a cash redemption price equal to
100% of the principal amount of the Convertible Notes to be
redeemed, plus accrued and unpaid interest to, but not including,
the redemption date, if the Company’s board of directors determines
such redemption is necessary to preserve the Company's status as a
real estate investment trust for U.S. federal income tax purposes.
The Company may not otherwise redeem the Convertible Notes prior to
December 8, 2025. On or after December 8, 2025 and prior to the
42nd scheduled trading day immediately preceding the maturity date,
if the last reported sale price per share of Common Stock has been
at least 130% of the conversion price for the Convertible Notes for
certain specified periods, the Company may, subject to a partial
redemption limitation, redeem all or a portion of the Convertible
Notes at a cash redemption price equal to 100% of the principal
amount of the Convertible Notes to be redeemed plus accrued and
unpaid interest to, but not including, the redemption date.
The Company intends to contribute a portion of
the net proceeds of the offering to Uniti Fiber Holdings Inc., a
subsidiary of the Company (“Uniti Fiber”), to repurchase a portion
of Uniti Fiber’s existing 4.00% exchangeable senior notes due 2024
(the “Existing Notes”). The Company intends to use a portion of the
net proceeds of the offering to pay the cost of the capped call
transactions described below. If the option granted to the initial
purchasers to purchase additional Convertible Notes is exercised,
the Company intends to use a portion of the net proceeds from the
sale of the additional Convertible Notes to enter into additional
capped call transactions described below. The Company intends to
use the remaining net proceeds for general corporate purposes,
which may include the repurchase or repayment of other outstanding
debt, including, but not limited to, additional open market
repurchases, redemptions or tender offers of the Existing
Notes.
Concurrently with the offering, and from time to
time after the offering, Uniti Fiber intends to repurchase some or
all of the outstanding Existing Notes through open market
repurchases, redemptions or tender offers. As of September 30,
2022, Uniti Fiber had $345,000,000 aggregate principal amount
outstanding of the Existing Notes. Any repurchase of the Existing
Notes could affect the market price of the Common Stock and, in the
case of any repurchase of the Existing Notes effected concurrently
with the offering, the initial conversion price of the Convertible
Notes. Uniti Fiber also expects that holders of the Existing Notes
that have their Existing Notes repurchased may purchase or sell
shares of the Common Stock in the market to hedge their exposure in
connection with these transactions. This activity could affect the
market price of the Common Stock and, in the case of any repurchase
of Existing Notes effected concurrently with the offering, could
also impact the initial conversion price of the Convertible
Notes.
In connection with the pricing of the
Convertible Notes, the Company intends to enter into privately
negotiated capped call transactions with one or more of the initial
purchasers and/or their respective affiliates or other financial
institutions (the “option counterparties”). The capped call
transactions will cover, subject to customary anti-dilution
adjustments substantially similar to those applicable to the
Convertible Notes, the same number of shares of Common Stock that
will initially underlie the Convertible Notes. The capped call
transactions are expected generally to reduce potential dilution to
the Common Stock and/or offset potential cash payments the Company
is required to make in excess of the principal amount, in each
case, upon any conversion of the Convertible Notes, with such
reduction and/or offset subject to a cap. If the market price per
share of the Common Stock, as measured under the terms of the
capped call transactions, exceeds the cap price of the capped call
transactions, there would nevertheless be dilution and/or there
would not be an offset of such potential cash payments, in each
case, to the extent that such market price exceeds the cap price of
the capped call transactions. If the initial purchasers exercise
their option to purchase additional Convertible Notes, the Company
may enter into additional capped call transactions with the option
counterparties.
In connection with establishing their initial
hedges of the capped call transactions, the option counterparties
and/or their respective affiliates have advised the Company that
they expect to purchase Common Stock or securities of the Company
in secondary market transactions and/or enter into various
derivative transactions with respect to the Common Stock
concurrently with or shortly after the pricing of the Convertible
Notes, including with certain investors in the Convertible Notes.
This activity could increase (or reduce the size of any decrease
in) the market price of Common Stock or the Convertible Notes at
that time. In addition, the option counterparties and/or their
respective affiliates may modify their hedge positions by entering
into or unwinding various derivatives with respect to the Common
Stock and/or purchasing or selling shares of Common Stock or
securities of the Company in secondary market transactions
following the pricing of the Convertible Notes and prior to the
maturity of the Convertible Notes (and are likely to do so
following conversion of the Convertible Notes, during any
observation period related to a conversion of the Convertible Notes
or upon any repurchase of Convertible Notes by the Company (whether
upon a fundamental change or otherwise)). The effect, if any, of
these activities on the market price of the Common Stock or the
Convertible Notes will depend in part on market conditions and
cannot be ascertained at this time, but any of these activities
could cause or prevent an increase or a decline in the market price
of the Common Stock or the Convertible Notes, which could affect
the ability of noteholders to convert the Convertible Notes and
could also affect the amount of cash and/or the number and value of
the shares of Common Stock noteholders receive upon conversion of
the Convertible Notes.
In connection with the issuance of the Existing
Notes, Uniti Fiber entered into exchangeable note hedge
transactions (the “existing exchangeable note hedge transactions”)
with certain financial institutions (the “Existing
Counterparties”), and the Company entered into warrant transactions
(the “existing warrant transactions”) with the Existing
Counterparties. To the extent Uniti Fiber effects any repurchases
of the Existing Notes, (i) Uniti Fiber intends to unwind a
corresponding portion of the existing exchangeable note hedge
transactions and (ii) the Company intends to unwind a corresponding
portion of the existing warrant transactions (collectively, the
“Unwind Transactions”). In connection with the Unwind Transactions,
Uniti Fiber and the Company expect to enter into agreements with
the Existing Counterparties to, on a net and aggregate basis,
receive cash and/or shares of Common Stock or deliver cash and/or
issue shares of Common Stock as a termination payment in respect of
the portion of the existing exchangeable note hedge transactions
and existing warrant transactions that are unwound. The amount of
cash or the number of shares of Common Stock that Uniti Fiber will
receive and the amount of cash that the Company will deliver or the
number of shares of Common Stock that the Company will issue are
based generally on the termination values of the unwound portions
of such transactions. Uniti Fiber and the Company may also unwind
the remaining existing exchangeable note hedge transactions and
existing warrant transactions with respect to the Existing Notes at
any time following the completion of the offering in connection
with any additional repurchases of the Existing Notes. In
connection with any of the foregoing transactions, the Existing
Counterparties may enter into or unwind various derivatives with
respect to the Common Stock and/or purchase or sell shares of
Common Stock or other securities of the Company in secondary market
transactions, which may affect the price of the Common Stock and,
in the case of the Unwind Transactions effected concurrently with
the offering, this activity could also impact the initial
conversion price of the Convertible Notes.
The Convertible Notes will not be registered
under the Securities Act of 1933, as amended (the “Securities
Act”), or any state securities laws, and may not be offered or sold
in the United States absent registration or an applicable exemption
from registration under the Securities Act or any applicable state
securities laws. The Convertible Notes will be offered only to
persons reasonably believed to be qualified institutional buyers
under Rule 144A under the Securities Act. Subject to a certain
exception, the Company has agreed to file a registration statement
covering resales of the shares of Common Stock issuable upon
conversion of the Convertible Notes with the Securities and
Exchange Commission (the “SEC”).
This press release does not constitute an offer
to sell, or a solicitation of an offer to buy, nor shall there be
any sale of these securities in any state or jurisdiction in which
such an offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state or jurisdiction.
ABOUT UNITI
Uniti, an internally managed real estate
investment trust, is engaged in the acquisition and construction of
mission critical communications infrastructure, and is a leading
provider of fiber and other wireless solutions for the
communications industry. As of September 30, 2022, Uniti owns
approximately 134,000 fiber route miles, 8.0 million fiber strand
miles, and other communications real estate throughout the United
States.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release may
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, as amended from
time to time. Those forward-looking statements include all
statements that are not historical statements of fact, including
those regarding the proposed offering of the Convertible Notes.
Words such as “anticipate(s),” “expect(s),”
“intend(s),” “estimate(s),” “foresee(s),” “plan(s),” “believe(s),”
“may,” “will,” “would,” “could,” “should,” “seek(s)” and similar
expressions, or the negative of these terms, are intended to
identify such forward-looking statements. These statements are
based on management's current expectations and beliefs and are
subject to a number of risks and uncertainties that could lead to
actual results differing materially from those projected,
forecasted or expected. Although we believe that the assumptions
underlying the forward-looking statements are reasonable, we can
give no assurance that our expectations will be attained. Factors
which could materially alter our expectations include, but are not
limited to, the future prospects and financial health of Windstream
Holdings, Inc. and subsidiaries, our largest customer; the ability
and willingness of our customers to meet and/or perform their
obligations under any contractual arrangements entered into with
us, including master lease arrangements; the ability and
willingness of our customers to renew their leases with us upon
their expiration, our ability to reach agreement on the price of
such renewal or ability to obtain a satisfactory renewal rent from
an independent appraisal, and the ability to reposition our
properties on the same or better terms in the event of nonrenewal
or in the event we replace an existing tenant; the availability of
and our ability to identify suitable acquisition opportunities and
our ability to acquire and lease the respective properties on
favorable terms; the risk that we fail to fully realize the
potential benefits of acquisitions or have difficulty integrating
acquired companies; our ability to generate sufficient cash flows
to service our outstanding indebtedness and fund our capital
funding commitments; our ability to access debt and equity capital
markets; the impact on our business or the business of our
customers as a result of credit rating downgrades and fluctuating
interest rates; our ability to retain our key management personnel;
changes in the U.S. tax law and other state, federal or local laws,
whether or not specific to REITs; covenants in our debt agreements
that may limit our operational flexibility; our expectations
regarding the effect of the COVID-19 pandemic, inflation and rising
interest rates on our results of operations and financial
condition; other risks inherent in the communications industry and
in the ownership of communications distribution systems, including
potential liability relating to environmental matters and
illiquidity of real estate investments; and additional factors
described in our reports filed with the SEC.
Uniti expressly disclaims any obligation to
release publicly any updates or revisions to any of the
forward-looking statements set forth in this press release to
reflect any change in its expectations or any change in events,
conditions or circumstances on which any statement is based.
INVESTOR AND MEDIA CONTACTS:
Paul Bullington, 251-662-1512Senior Vice President, Chief
Financial Officer &
Treasurerpaul.bullington@uniti.com
Bill DiTullio, 501-850-0872Vice President, Finance and Investor
Relationsbill.ditullio@uniti.com
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