Uniti Group Inc. (the “Company”, “Uniti”, or “we”) (Nasdaq: UNIT)
today announced that it has priced its previously announced
offering of $300 million aggregate principal amount of 7.50%
convertible senior notes due 2027 (the “Convertible Notes”).
The Company granted 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 offering is expected to
settle on December 12, 2022, subject to customary closing
conditions.
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 bear interest at a
fixed rate of 7.50% per year, payable semiannually in arrears on
June 1 and December 1 of each year, beginning on June 1, 2023. 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 conversion rate
will initially be 137.1742 shares of Common Stock per $1,000
principal amount of Convertible Notes (equivalent to an initial
conversion price of approximately $7.29 per share of Common Stock).
The initial conversion price of the Convertible Notes represents a
premium of approximately 20% to the $6.075 closing price of the
Common Stock on the Nasdaq Global Select Market on December 7,
2022. The conversion rate will be subject to adjustment in some
events. In addition, following certain corporate events that occur
prior to the maturity date or the Company’s delivery of a notice of
redemption, the Company will increase, in certain circumstances,
the conversion rate for a holder who elects to convert its
Convertible Notes in connection with such a corporate event or
elects to convert its Convertible Notes called (or deemed called)
for redemption in connection with such notice of redemption, as the
case may be.
If the Company undergoes a fundamental change
(as defined in the indenture governing the Convertible Notes),
subject to certain conditions, holders may require the Company to
repurchase for cash all or part of their Convertible Notes at a
repurchase price equal to 100% of the principal amount of the
Convertible Notes to be repurchased, plus accrued and unpaid
interest, if any, to, but excluding, the fundamental change
repurchase date.
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.
Concurrently with the offering, Uniti Fiber
Holdings Inc. (“Uniti Fiber”), a subsidiary of the Company, entered
into separate and individually negotiated repurchase transactions
with certain holders of its existing 4.00% exchangeable senior
notes due 2024 (the “Existing Notes”) to repurchase approximately
$207 million aggregate principal amount of the Existing Notes for a
total purchase cost of approximately $194 million in cash, plus
accrued and unpaid interest. From time to time after the offering,
Uniti Fiber may repurchase additional Existing Notes through open
market repurchases, redemptions or tender offers. The repurchases
of the Existing Notes could affect the market price of the Common
Stock, the market price of the Convertible Notes and 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, the market price of the Convertible Notes and the
initial conversion price of the Convertible Notes.
In addition, the Company expects to use $20.7
million of the net proceeds from the offering of the Convertible
Notes 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.
In connection with the pricing of the
Convertible Notes, the Company has entered into privately
negotiated capped call transactions with certain financial
institutions, including one or more of the initial
purchasers and/or their respective affiliates (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. The cap
price of the capped call transactions will initially be
approximately $10.63 per share, which represents a premium of
approximately 75% over the last reported sale price of the Common
Stock of $6.075 per share on December 7, 2022, and will be subject
to customary anti-dilution adjustments. 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. In connection with Uniti Fiber’s repurchase of the
Existing Notes, Uniti Fiber and the Company entered into partial
unwind agreements (the “Unwind Agreements”) with the Existing
Counterparties to, concurrently with the offering, unwind a
corresponding portion of the existing exchangeable note hedge
transactions and the existing warrant transactions (collectively,
the “Unwind Transactions”). In connection with the Unwind
Transactions and pursuant to the Unwind Agreements, Uniti Fiber
will receive cash as a termination payment in respect of the
portion of the existing exchangeable note hedge transactions that
are unwound and the Company will pay cash as a termination payment
in respect of the portion of the existing warrant transactions that
are unwound. The amount of cash that Uniti Fiber will receive and
the amount of cash that the Company will deliver 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 the Unwind 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, 251-662-1512 Senior Vice
President, Chief Financial Officer & Treasurer
paul.bullington@uniti.com
Bill DiTullio, 501-850-0872 Vice President,
Finance and Investor Relations bill.ditullio@uniti.com
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