In connection with the offering of the Notes described in Item 8.01 below, the Company is disclosing the information set forth below in a preliminary
offering memorandum, dated October 26, 2020 (the “Offering Memorandum”). The information in this current report should be read in conjunction with the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December
31, 2019 (the “Form 10-K”), the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 (the “First Quarter 2020 Form 10-Q”) and June 30, 2020 (together with the First Quarter 2020 Form 10-Q, the “2020 Form 10-Qs”), respectively, and
the information under the “Cautionary Statement Regarding Forward-Looking Statements” in the Form 10-K, as modified hereby.
The information contained in this Item 7.01 is furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or
otherwise subject to the liabilities of that section, and such information shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act, except as expressly set forth by specific
reference in such a filing.
Information included in the Offering Memorandum:
COVID-19 update
The negative impacts associated with the actions we took in response to the pandemic continued in the third quarter of 2020, due primarily to the
now-concluded suspension of data overage fees, late charges and reconnect fees and diminished growth in business services revenues coupled with higher labor costs and other operating expenses. However, these reduced revenues and additional costs
are expected to be more than offset in the third quarter of 2020 by a greater-than-usual gain in residential data customers over the second and third quarters of 2020 and the associated increase in residential data revenues as well as lower travel
costs. In addition, for the three months ended September 30, 2020, we expect to record sequentially lower bad debt expense as collections of receivables were better than originally estimated.
We expect the negative impacts associated with the actions we took in response to the pandemic to largely dissipate during the fourth quarter of 2020,
due primarily to the resumption of billing late charges, reconnect fees and data overage fees for a full quarter as well as the normalization of labor costs. In addition, the increase in residential data revenues associated with the significant
number of residential data customers acquired during the COVID-19 pandemic is anticipated to continue during the fourth quarter of 2020. However, we continue to face various uncertainties related to the impact of the COVID-19 pandemic on the
overall economy and our business, including whether we are able to sustain continued customer growth, our level of bad debt expense and if some of the expense reductions realized during the third quarter of 2020 will continue or if those expenses
will return to more normal levels given the fluid situation regarding pandemic-related restrictions across the country.
MBI transactions
As of September 30, 2020, Mega Broadband Investments Holdings LLC (“MBI”) provided service to more than 200,000 data customers out of approximately
640,000 homes passed with a video penetration rate of approximately 10%. In addition, MBI’s network has upgraded systems and a high-capacity plant with more than 15,800 network plant miles, including over 4,100 fiber route miles, capable of
delivering Gigabit speeds across its footprint, in each case as of September 30, 2020. MBI’s last quarter annualized revenue (calculated as MBI’s revenue for the three months ended September 30, 2020 multiplied by four) was approximately $258
million, and its commercial revenue as a percentage of total revenue for the three months ended September 30, 2020 was approximately 17%.
Concurrent financing transactions
Upsize and extension of Term Loan B-3
We recently launched an amendment with respect to our credit agreement to upsize and extend our term “B-3” loan tranche that is scheduled to mature in
January 2026 (the “Term Loan B-3”). As of June 30, 2020, the aggregate outstanding principal amount of our Term Loan B-3 was approximately $321.8 million. We are seeking to upsize the Term Loan B-3 by approximately $300.0 million aggregate
principal amount and extend the scheduled maturity of the entire tranche to the date in 2027 that is the seventh anniversary of the effective date of the amendment (the “B-3 Upsize and Extension”). We expect to use the net proceeds of the B-3
Upsize and Extension, together with cash on hand, to repay all $485.0 million aggregate principal amount of our outstanding term “B-1” loans scheduled to mature in May 2024 (the “Term Loan B-1”).
Except as described above, we do not expect there to be any material changes to the terms of the Term Loan B-3 as part of the B-3 Upsize and Extension,
but the issue price of and fees related to the new loans will be subject to market conditions at or prior to the time we execute the definitive documentation for the B-3 Upsize and Extension.
There can be no assurance that we will consummate the B-3 Upsize and Extension on the terms described herein or at all. Completion of the B-3 Upsize
and Extension is not conditioned upon the completion of the offering of the Notes and the offering of the Notes is not conditioned upon the completion of the B-3 Upsize and Extension.
Extension of Term Loan B-2
We recently launched an amendment with respect to our credit agreement to extend our term “B-2” loan tranche that is scheduled to mature in January
2026 (the “Term Loan B-2”). As of June 30, 2020, the aggregate outstanding principal amount of our Term Loan B-2 was approximately $246.9 million. We are seeking to extend the scheduled maturity of our Term Loan B-2 to the date in 2027 that is the
seventh anniversary of the effective date of the amendment (the “B-2 Extension”).
Except as described above, we do not expect there to be any material changes to the terms of the Term Loan B-2 as part of the B-2 Extension. The fees
related to B-2 Extension will be subject to market conditions at or prior to the time we execute the definitive documentation for the B-2 Extension.
There can be no assurance that we will consummate the B-2 Extension on the terms described herein or at all. Completion of the B-2 Extension is not
conditioned upon the completion of the offering of the Notes and the offering of the Notes is not conditioned upon the completion of the B-2 Extension.
Amendment and extension of Term Loan A-2 and Revolving Credit Facility
We recently launched an amendment with respect to our credit agreement to extend the scheduled maturity of our term “A-2” loan facility (the “Term Loan
A-2”) and revolving credit facility (the “Revolving Credit Facility”), increase the amount of commitments under our Revolving Credit Facility and make certain other amendments. As of June 30, 2020, we had approximately $685.3 million aggregate
principal amount of Term Loan A-2 outstanding and $350.0 million aggregate principal amount of commitments under our Revolving Credit Facility, and each facility is scheduled to mature in May 2024. We are seeking to (i) increase the aggregate
principal amount of commitments under our Revolving Credit Facility by up to $150.0 million to $500.0 million, (ii) extend the scheduled maturity of our Term Loan A-2 and Revolving Credit Facility to the date in 2025 that is the fifth anniversary
of the effective date of the amendment and (iii) reset the amortization schedule of the Term Loan A-2 so that the Term Loan A-2 will amortize in equal quarterly installments at a rate (expressed as a percentage of the outstanding principal amount
on the effective date of the amendment) of 2.5% per annum for each of the first two years following the effective date of the amendment, 5.0% per annum for the third year following the date of the effective date of the amendment, 7.5% per annum for
the fourth year following the effective date of the amendment and 12.5% per annum for the fifth year following the effective date of the amendment (in each case subject to customary adjustments in the event of any prepayment), with the balance due
upon maturity (collectively, the “RCF/A-2 Amendment and Extension Transaction”).
Except as described above, we do not expect there to be any material changes to the terms of the Term Loan A-2 and Revolving Credit Facility as part of
the RCF/A-2 Amendment and Extension Transaction. The fees related to the RCF/A-2 Amendment and Extension Transaction will be subject to market conditions at or prior to the time we execute the definitive documentation for the RCF/A-2 Amendment and
Extension Transaction.
There can be no assurance that we will consummate the RCF/A-2 Amendment and Extension Transaction on the terms described herein or at all. Completion
of the RCF/A-2 Amendment and Extension Transaction is not conditioned upon the completion of the offering of the Notes and the offering of the Notes is not conditioned upon the completion of the RCF/A-2 Amendment and Extension Transaction.