On January 8, 2021, the Company filed a definitive proxy statement (the “proxy statement”) in order to obtain shareholder approval of the physical settlement features of
the Convertible Notes (the “shareholder approval proposal”). The following disclosures in this Current Report on Form 8-K supplement the disclosures contained in the proxy statement and should be read in conjunction with the disclosures contained
in the proxy statement, which in turn should be read in its entirety. To the extent that information in this Current Report on Form 8-K differs from or updates information contained in the proxy statement, the information in this Current Report on
Form 8-K shall supersede or supplement the information in the proxy statement. All page references are to the proxy statement and terms used below, unless otherwise defined, shall have the meanings ascribed to such terms in the proxy statement.
The disclosure in the section entitled “Effect of Stockholder Approval”, beginning on page 6 of the proxy statement, is hereby
amended by adding the following paragraph to the end of the section:
Impact of Conversion on NOLs. Federal and state tax laws impose restrictions on the utilization of net operating loss (“NOL”) carryforwards and other tax attributes in the event of an “ownership change” as defined by Section 382 of the Internal Revenue
Code of 1986, as amended (“Section 382”). Generally, an “ownership change” occurs if the percentage of the value of the stock that is owned by one or more direct or indirect “five percent Stockholders” increases by more than 50% over their lowest
ownership percentage at any time during an applicable testing period (typically, three years). Under Section 382, if a corporation undergoes an “ownership change,” such corporation’s ability to use its pre-change NOL carryforwards and other
pre-change tax attributes to offset its post-change income may be limited. The issuance of Common Stock upon conversion of the Notes (in the event the Company elects to issue Common Stock upon any such conversions, rather than cash), may trigger
an “ownership change”. If an “ownership change” occurs in the future, utilization of our NOL carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability to us.
The disclosure in the section entitled “Effect of Failure to Obtain Stockholder Approval”, beginning on page 7 of the proxy
statement, is hereby amended by deleting the second paragraph entitled “Additional Interest”.
The disclosure in the section entitled “Description of the Notes”, beginning on page 7 of the proxy statement, is hereby amended
and restated in its entirety as follows:
Interest Rate. The Company will pay interest on the Notes at an annual rate of 6% payable on June
1 and December 1 of each year, beginning on June 1, 2021.
Maturity. The
Notes will mature on December 1, 2027, unless earlier repurchased or converted.
Guarantees; Collateral; Ranking. The Notes are guaranteed by Gannett Holdings LLC and any subsidiaries of the Company (collectively, the “Guarantors”) that guarantee the First Lien Credit Agreement (the “First Lien Credit Agreement”) dated as of February 9,
2021, among the Company, as a guarantor, Gannett Holdings LLC, as the borrower, certain subsidiaries of the Borrower as guarantors, the lenders from time to time party thereto and Citibank, N.A., as collateral agent and administrative agent for
the lenders. The Notes are secured by the same collateral securing the First Lien Credit Agreement. The Notes rank as senior secured debt of the Company and the Notes are secured by a second priority lien on the same collateral package securing
the indebtedness incurred in connection with the First Lien Credit Agreement.
Conversion. The Notes may be converted at any time by the holders into cash, Common Stock or
any combination of cash and Common Stock, at the Company’s election, based on the Conversion Rate. Each Note is convertible at an initial conversion rate of 200 shares of Common Stock per $1,000 principal amount of Notes (subject to adjustment as
provided in the Indenture, the “Conversion Rate”). The initial Conversion Rate corresponds to a conversion price of $5.00 per share of Common Stock (the “Conversion Price”), representing a conversion premium of approximately 187% based on the
closing price of $1.74 per share of Common Stock on November 16, 2020).
Adjustments to Conversion Rate. The applicable Conversion Rate, as provided in the Indenture, is subject to adjustment as a result of the following events:
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issuance of a Common Stock dividend;
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effecting a share split or combination of the Company’s shares of Common Stock;
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issuance of rights, options or warrants (other than in connection with a stockholder rights plan) entitling the holder, for a period of not more than 60 days, to subscribe for or purchase shares of Common Stock at a price per share less
than the average of the last reported sale price per share of Common Stock for the 10 trading days ending on the trading day immediately preceding the declaration date for such issuance;
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distribution of equity interests, evidences of indebtedness or other assets or property of ours, or other rights, options or warrants to acquire equity interests or other securities of the Company (subject to certain exceptions);
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distribution of cash dividends (other than dividends in connection with the Company’s liquidation, dissolution or winding up and a regularly quarterly cash dividend that does not exceed the Dividend Threshold (as defined in the
Indenture)); or
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payment in respect of a tender or exchange offer for shares of Common Stock (other than odd lot tender offers) to the extent that the cash and value of any other consideration included in the payment exceeds the average of the last
reported sale price per share of Common Stock for the 10 trading days commencing on, and including, the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer.
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In addition, the Conversion Rate will be subject to adjustment in the event of any issuance or sale of Common Stock (or securities convertible into Common Stock) at a
price equal to or less than the Conversion Price in order to ensure that following such issuance or sale, the Notes would be convertible into approximately 42% of the Company’s outstanding Common Stock after giving effect to such issuance or sale
(assuming the initial principal amount of the Notes remains outstanding).
If a “Make-Whole Fundamental Change” (as defined in the Indenture) occurs, the Company will in certain circumstances increase the Conversion Rate for a specified
period of time. The amount of such increase will be based on the effective date of the applicable Make-Whole Fundamental Change and the Stock Price (as defined in the Indenture) at the time of the applicable Make-Whole Fundamental Change. The
maximum Conversion Rate in connection with a Make-Whole Fundamental Change is 592 shares of Common Stock per $1,000 principal amount of Notes (assuming no other adjustments to the Conversion Rate).
Limitations on Conversion. If an event occurs that would result in an increase in the Conversion Rate by an amount in excess of limitations imposed by any stockholder approval rules or listing standards applicable to the Company or the Company has not
obtained stockholder approval of the issuance of the maximum number of shares of Common Stock upon conversion of the Notes, the Company is required to seek to obtain stockholder approval of any issuance of Common Stock upon conversion of the
Notes in excess of such limitations and, until such approval is obtained, pay cash in lieu of delivering any shares of Common Stock otherwise deliverable upon conversions in excess of such limitations. If this proposal is approved and, therefore,
stockholder approval of the issuance of the maximum number of shares of Common Stock issuable upon conversion of the Notes is obtained, this limitation will not apply.
Company’s Redemption Right. Until the four-year anniversary of the issuance date, the Company will have the right to redeem for cash up to approximately $100 million of the Notes at a redemption price of 130% of the principal amount thereof, with such
amount reduced ratably by any principal amount of Notes that has been converted by the holders or redeemed or purchased by the Company.
Repurchase of Notes at the Option of Holders. Following an Event of Default (as defined in the Indenture) and so long as such Event of Default is continuing, the Notes will be subject to an “asset sale” sweep and “unrestricted cash” sweep substantially
identical to the corresponding provisions in the First Lien Credit Agreement.
Holders of the Notes will have the right to put up to approximately $100 million of the Notes at par, on or after the date that is 91 days after the maturity date of
the First Lien Credit Agreement.
If a “Fundamental Change” (as defined in the Indenture) occurs, the Company will be required to offer to repurchase the Notes at a repurchase price of 110% of the
principal amount thereof.
Limitations on Dividends. Before paying a dividend, unless the Company’s pro forma Total Gross Leverage Ratio (as defined in the Indenture) is less than 1.50x, the Company must offer to redeem an aggregate principal amount of Notes equal to the proposed
amount of such dividend at a redemption price equal to the principal amount thereof. To the extent the redemption offer is not required by the Indenture or is rejected by the noteholders, the Company may pay the dividend, subject to a customary
adjustment to the conversion rate.
Other Covenants. The Indenture includes affirmative and negative covenants that are substantially consistent with the First Lien Credit Agreement, as well as customary events of default.
The terms of the Notes are more fully described in the Indenture, which is attached to this proxy statement as Appendix A, as supplemented by the First Supplemental
Indenture, dated as of December 21, 2020, between the Company, certain Subsidiary Guarantors (as defined in the Indenture) and U.S. Bank National Association (the “Trustee”), as trustee, and the Second Supplemental Indenture, dated as of February
9, 2021, between the Company, certain Subsidiary Guarantors and the Trustee.
The first paragraph of the disclosure in the section entitled “Recommendation”, beginning on page 10 of the
proxy statement, is hereby amended and restated as follows:
The Board has determined that the ability to issue shares of Common Stock in connection with the conversion of the Notes is in the best interests
of the Company and its stockholders because it will increase the Company’s flexibility to settle conversion of the Notes with shares of Common Stock (rather than cash of an equivalent value).
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the shareholder approval proposal. In connection with the shareholder approval proposal, the
Company has filed relevant materials with the United States Securities and Exchange Commission (the “SEC”), including the Company’s definitive proxy statement. The Company filed its definitive proxy statement with the SEC on January 8, 2021. Shareholders of the Company are urged to read all relevant documents filed or to be filed with the SEC, including the Company’s definitive proxy statement, because they contain or will contain important information
about the shareholder approval proposal. Investors and security holders are able to obtain the proxy statement and other documents (once available) free of charge at the SEC’s website at www.sec.gov.
Participants in the Solicitation
The Company and its directors, executive officers and other members of management and employees, under SEC rules, may be deemed to be “participants” in the
solicitation of proxies from shareholders of the Company in favor of the proposed transaction. Information about the Company’s directors and executive officers is set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, which was filed with the SEC on March 2, 2020, and the definitive proxy statement relating to the shareholder approval proposal, which was filed with the SEC on January 8, 2021. Information concerning the interests of the
Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s shareholders generally, is set forth in the materials filed by the Company with the SEC, including the definitive proxy statement.