Consolidated Communications (NASDAQ: CNSL) (the “Company”)
announced today that it has completed the first stage of its
previously disclosed investment transaction (the “Investment”) with
an affiliate of Searchlight Capital Partners, L.P. (“Searchlight”)
and the refinancing of its remaining outstanding debt. In
connection with the Investment, affiliates of Searchlight have
committed to invest up to an aggregate of $425 million in the
Company and the initial $350 million of the Investment was
completed today.
Investment
Structure
The Investment is structured in two
stages. In this first stage, Searchlight invested $350 million
in the Company in exchange for 8 percent of the Company’s
common stock. In addition, Searchlight has received a contingent
payment right (“CPR”) convertible, upon the receipt of certain
regulatory and shareholder approvals, into an additional
16.9 percent of the Company’s common stock, and the right to
receive an unsecured subordinated note with a principal amount of
approximately $395.5 million. In the second stage, upon
receipt of FCC and Hart Scott Rodino approvals and the satisfaction
of certain other customary closing conditions, Searchlight will
invest an additional $75 million and will be issued the note,
which will be convertible into shares of perpetual preferred stock
of the Company with an aggregate liquidation preference equal to
the principal amount of the note at that time. The Company expects
to receive FCC approval in mid-2021. In addition, in the second
stage and following shareholder approval, the CPR will be
convertible into an additional 10.1 percent of the Company’s
common stock. Upon completion of both stages, the common stock and
CPR issued to Searchlight will represent approximately
35 percent of the Company’s common stock on
an as-converted basis.
Board of
Directors
The Company also announced its board
of directors has appointed Dave Fuller to the board, effective as
of the closing of the Investment today and Andrew Frey as a
non-voting observer.
Refinancing
In addition, the Company and certain
of its wholly-owned subsidiaries completed a global refinancing in
which it raised $2.25 billion in new secured debt (including the
new revolving credit facility) and retired all of its outstanding
debt.
- The new credit agreement consists
of a five-year $250 million revolving credit facility and a
seven-year term loan in the aggregate amount of $1.25 billion. The
term loan extends the Company’s maturity date to late 2027 and is
priced at a coupon rate of LIBOR plus 4.75% per annum, with a 1.0%
LIBOR floor.
- The Company also raised $750
million aggregate principal amount of 6.500% senior secured notes
due 2028.
“We’re very pleased with the strong
support from investors and the terms of our refinancing,” said
Steve Childers, chief financial officer at Consolidated
Communications. “This successful refinancing, combined with the
strategic investment, significantly strengthens the balance sheet
and aligns with our deleveraging targets. Our new capital structure
improves our balance sheet, extends maturities and significantly
improves liquidity, all of which provides us with much greater
flexibility to support our fiber expansion and growth plan.”
“We are confident our new structure
and enhanced strategy, combined with a resilient and stable core
business, provide us everything we need to complete the
transformation of our Company,” said Bob Udell, president and chief
executive officer at Consolidated Communications. “We are pleased
to begin our strategic partnership with Searchlight and bring the
most competitive broadband services to the people and communities
we serve. We have the right team, attractive markets, a robust
near-net fiber network, and now the capital structure to allow us
to return to revenue growth. Our next era of fiber expansion, which
is already underway, will bring significant benefits to consumer,
commercial and carrier customers.”“Searchlight is excited to close
the first phase of the transaction, which combined with the debt
refinancing, enables Consolidated to immediately increase its
investment in fiber,” said Andrew Frey, partner at Searchlight
Capital. “We look forward to the long-term partnership with the
board and management as we drive value creation for all
Consolidated stakeholders.”Advisors
Morgan Stanley & Co. LLC and
Wells Fargo Securities, LLC are serving as financial advisors to
Consolidated Communications and Schiff Hardin LLP is serving as
legal counsel to Consolidated Communications. J.P. Morgan
Securities LLC is serving as lead financial advisor to Searchlight,
and Goldman Sachs LLC, Deutsche Bank and TD Securities Inc. have
also provided financial advisory services to Searchlight. Wachtell,
Lipton, Rosen & Katz is serving as legal counsel, and
Wiley Rein LLP is serving as regulatory counsel, to
Searchlight.
Forward-Looking Statements
Certain statements in this press
release are forward-looking statements and are made pursuant
to the safe harbor provisions of the Securities Litigation Reform
Act of 1995. These forward-looking statements reflect, among other
things, our current expectations, plans, strategies, and
anticipated financial results. There are a number of risks,
uncertainties, and conditions that may cause our actual results to
differ materially from those expressed or implied by these
forward-looking statements. These risks and uncertainties include a
number of factors related to our business, including the
uncertainties relating to the impact of the novel
coronavirus (COVID-19) pandemic on the Company’s
business, results of operations, cash flows, stock price and
employees; the possibility that any of the anticipated benefits of
the strategic investment from Searchlight or our refinancing of
outstanding debt, including our senior secured credit facilities,
will not be realized; the outcome of any legal proceedings that may
be instituted against the Company or its directors; the ability to
obtain regulatory approvals and meet other closing conditions to
the investment on a timely basis or at all, including the risk that
regulatory approvals required for the investment are not obtained
on a timely basis or at all, or are obtained subject to conditions
that are not anticipated or that could adversely affect the Company
or the expected benefits of the investment; the anticipated use of
proceeds of the strategic investment; economic and financial market
conditions generally and economic conditions in our service areas;
various risks to the price and volatility of our common stock;
changes in the valuation of pension plan assets; the substantial
amount of debt and our ability to repay or refinance it or incur
additional debt in the future; our need for a significant amount of
cash to service and repay the debt restrictions contained in our
debt agreements that limit the discretion of management in
operating the business; regulatory changes, including changes to
subsidies, rapid development and introduction of new technologies
and intense competition in the telecommunications industry; risks
associated with our possible pursuit of acquisitions; system
failures; cyber-attacks, information or security breaches or
technology failure of ours or of a third party; losses of large
customers or government contracts; risks associated with
the rights-of-way for the network; disruptions in the
relationship with third party vendors; losses of key management
personnel and the inability to attract and retain highly qualified
management and personnel in the future; changes in the extensive
governmental legislation and regulations governing
telecommunications providers and the provision of
telecommunications services; new or changing tax laws or
regulations; telecommunications carriers disputing and/or avoiding
their obligations to pay network access charges for use of our
network; high costs of regulatory compliance; the competitive
impact of legislation and regulatory changes in the
telecommunications industry; and liability and compliance costs
regarding environmental regulations; and risks associated with
discontinuing paying dividends on our common stock. A detailed
discussion of these and other risks and uncertainties that could
cause actual results and events to differ materially from such
forward-looking statements are discussed in more detail in our
filings with the SEC, including our reports on
Form 10-K and Form 10-Q. Many of these
circumstances are beyond our ability to control or predict.
Moreover, forward-looking statements necessarily involve
assumptions on our part. These forward-looking statements generally
are identified by the words “believe,” “expect,” “anticipate,”
“estimate,” “project,” “intend,” “plan,” “should,” “may,” “will,”
“would,” “will be,” “will continue” or similar expressions. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results,
performance or achievements of the Company and its subsidiaries to
be different from those expressed or implied in the forward-looking
statements. All forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their
entirety by the cautionary statements that appear throughout this
press release. Furthermore, forward-looking statements speak only
as of the date they are made. Except as required under the federal
securities laws or the rules and regulations of the SEC, we
disclaim any intention or obligation to update or revise publicly
any forward-looking statements. You should not place undue reliance
on forward-looking statements.
About Consolidated Communications
Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) is a
leading broadband and business communications provider serving
consumers, businesses, and wireless and wireline carriers across
rural and metro communities and a 23-state service area. Leveraging
an advanced fiber network spanning 46,000 fiber route miles,
Consolidated Communications is a top-10 fiber provider in the U.S.
offering a wide range of communications solutions, including:
high-speed Internet, data, phone, security, managed services, cloud
services and wholesale, carrier solutions. From our first
connection 125 years ago, Consolidated is dedicated to turning
technology into solutions, connecting people and enriching how they
work and live. Visit www.consolidated.com for more
information.About Searchlight Capital Partners
Searchlight is a global private investment firm with over $7
billion in assets under management and offices in New York, London
and Toronto. Searchlight seeks to invest in businesses where its
long-term capital and strategic support accelerate value creation
for all stakeholders. For more information, please
visit www.searchlightcap.com.
Contact: Investor Relations
Contact:Jennifer Spaude, 507-386-3765
investor@consolidated.com
Media Inquiries:media@consolidated.com
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