Gannett Announces Commitment Letter to Secure New Credit Facility to Refinance Existing Debt

Rhea-AI Summary

Gannett Co., Inc. (NYSE: GCI) has entered into a commitment letter for a comprehensive debt refinancing plan. The plan includes a new senior secured credit facility of up to $900 million with Apollo Funds, comprising an initial term loan of $675 million and a delayed draw facility of $225 million. The refinancing aims to:

1. Extend debt maturities
2. Reduce future dilution from 6.0% Senior Secured Convertible Notes due 2027
3. Repay existing term loan and 2026 Notes
4. Repurchase up to 50% of outstanding 2027 Notes

Apollo Funds will exchange $441 million of 2027 Notes, with 50% in cash and 50% for new 2031 Notes. The transactions are expected to close later this fall, subject to approvals and conditions.

Positive

• New $900 million senior secured credit facility with Apollo Funds
• Extension of debt maturities to 2029
• Reduction of future dilution from 2027 Notes
• Repayment of existing term loan and 2026 Notes
• Repurchase of up to 50% of outstanding 2027 Notes
• Improved financial flexibility and balance sheet strengthening

Negative

• Increased interest rate on new Term Loan Facility (SOFR plus 5.0% margin)
• Potential dilution from new 2031 Notes
• Increased debt load with new $900 million credit facility

Insights

Financial Analyst

Gannett's debt refinancing plan is a significant strategic move aimed at improving its financial position. The new $900 million Term Loan Facility, including a $675 million Initial Term and $225 million Delayed Draw, will help extend debt maturities and reduce dilution from convertible notes. This restructuring could provide Gannett with more financial flexibility and breathing room to execute its long-term growth strategy.

The refinancing terms, including the SOFR plus 5.0% interest rate and the ability to redeem up to 30% of new 2031 Notes at 140% of face value, appear reasonable given the company's current financial situation. However, investors should note that while this refinancing alleviates immediate pressure, Gannett still faces challenges in an evolving media landscape and will need to demonstrate progress in its digital transformation to fully capitalize on this financial restructuring.

Corporate Restructuring Specialist

This refinancing deal showcases a comprehensive approach to debt management. By replacing existing debt with a new facility and restructuring convertible notes, Gannett is effectively extending its runway for financial recovery and growth. The involvement of Apollo Funds as a strategic partner adds credibility to the transaction and suggests confidence in Gannett's future prospects.

The offer to exchange 2026 Notes for cash or new loans, coupled with the repurchase of up to 50% of 2027 Notes, indicates a proactive stance in managing near-term maturities. The creation of new 2031 Notes with similar terms but extended maturity further supports this strategy. However, the success of this restructuring will ultimately depend on Gannett's ability to leverage this financial flexibility to drive operational improvements and revenue growth in its core business.

Media Industry Analyst

Gannett's refinancing move reflects the ongoing challenges faced by traditional media companies in adapting to the digital age. While the debt restructuring provides financial breathing room, it's important to view this in the context of the company's broader transformation efforts. The emphasis on digital marketing solutions through LocaliQ and the diversification into events with USA TODAY NETWORK Ventures indicate attempts to find new revenue streams.

However, the success of these initiatives remains to be seen. Investors should closely monitor Gannett's progress in growing digital revenues and achieving cost efficiencies. The refinancing buys time, but the company must demonstrate tangible progress in its transformation strategy to justify this financial restructuring. The media landscape continues to evolve rapidly and Gannett's ability to innovate and adapt will be critical for long-term sustainability.

NEW YORK, NY--(BUSINESS WIRE)-- Gannett Co., Inc. (“Gannett”, “we”, “our”, or the “Company”) (NYSE: GCI) announced today it has entered into a commitment letter for a comprehensive debt refinancing that is expected to extend our debt maturities and significantly reduce future dilution from the Company’s 6.0% Senior Secured Convertible Notes due 2027 (the “2027 Notes”).

The commitment letter provides for a new senior secured credit facility (the “Term Loan Facility”) with funds managed by affiliates of Apollo (NYSE: APO) (“Apollo Funds”) of up to $900 million, to be comprised of an initial term loan facility of approximately $675 million (the “Initial Term Facility”), to be funded at the time of closing, and a delayed draw term loan facility of approximately $225 million (the “Delayed Draw Facility”), which will be available at the Company’s discretion at closing and during the six months following closing, subject to certain customary funding conditions. Net proceeds from the Term Loan Facility will be used to repay in full the outstanding principal of the Company’s five-year senior secured term loan facility maturing October 15, 2026, to purchase or redeem the 6.0% first lien notes due November 1, 2026 (the “2026 Notes”) and to repurchase for cash up to 50% of the outstanding 2027 Notes. The Term Loan Facility will mature five years after the closing date and will bear interest at an annual rate equal to SOFR plus a margin of 5.0% with a floor of 150 basis points.

Gannett intends to make an offer to the holders of outstanding 2026 Notes for, at the election of holders, cash consideration at a price of $1,000 for each $1,000 principal amount of 2026 Notes tendered or loans under the Term Loan Facility on a par-for-par basis. As part of these overall transactions, the Apollo Funds have agreed to tender for cash all the 2026 Notes held by such Apollo Funds (having an aggregate principal amount of approximately $81 million) in the exchange offer. The proceeds of the Delayed Draw Facility may be used to repurchase any additional 2026 Notes that are tendered for cash at the time of closing in connection with the exchange offer or to later redeem the outstanding balance of the 2026 Notes in accordance with the terms of the indenture for the 2026 Notes.

In addition, as part of the refinancing transactions, Apollo Funds have agreed to exchange approximately $441 million principal amount of 2027 Notes, with 50% of the aggregate principal amount to be exchanged for cash at a rate of $1,110 per $1,000 principal amount of 2027 Notes and 50% of the aggregate principal amount to be exchanged for new 6.0% Senior Secured Convertible Notes due 2031 (the “2031 Notes”) and otherwise having substantially similar terms to the existing notes. Gannett may redeem up to 30% of the outstanding principal amount of the 2031 Notes at a redemption price of 140% prior to December 1, 2030 (or, under certain circumstances, prior to December 1, 2028). Subject to applicable law, Gannett may repurchase and exchange additional 2027 Notes in individually negotiated, private transactions.

The transactions are expected to close later this fall, subject to any required approvals and customary closing conditions. Other than the tender and exchange transactions with Apollo Funds, there can be no assurance that the exchange offer for the 2026 Notes or that any offer we make to repurchase and exchange any 2027 Notes will be successful.

“This committed plan of refinancing is a significant milestone and the next step on our path towards anticipated sustainable long-term growth and value creation,” said Michael Reed, Chairman and Chief Executive Officer. “We believe our ability to successfully refinance our existing facilities, while extending the term loan maturity date to 2029 and significantly reducing the future impact of the 2027 Notes, reflects Gannett's long-term strategy and the progress made against the strategy from an execution standpoint. We believe this refinancing shows Apollo's commitment to being an excellent partner to Gannett, especially as it relates to our capital structure. We believe this new financing gives the Company generous runway to repay its debt, and the reduced future dilution from the convertible notes is expected to be significant for our shareholders. We believe this transaction announced today creates the time and flexibility for further investment in growth in order to achieve our transformation and fully unlock value for our shareholders.”

Apollo Partner and Head of Portfolio Strategy Robert Givone said, “We continue to be supportive of Gannett. We believe this comprehensive refinancing will enable Gannett to further strengthen its balance sheet and enhance its financial flexibility, and that the transactions demonstrate the creative capital solutions that Apollo is able to provide to great companies.”

About Gannett

Gannett Co., Inc. (NYSE: GCI) is a diversified media company with expansive reach at the national and local level dedicated to empowering and enriching communities. We seek to inspire, inform, and connect audiences as a sustainable, growth focused media and digital marketing solutions company. We endeavor to deliver essential content, marketing solutions, and experiences for curated audiences, advertisers, consumers, and stakeholders by leveraging our diverse teams and suite of products to enrich the local communities and businesses we serve. Our current portfolio of trusted media brands includes the USA TODAY NETWORK, comprised of the national publication, USA TODAY, and local media organizations in the United States, and Newsquest, a wholly-owned subsidiary operating in the United Kingdom. Our digital marketing solutions brand, LocaliQ, uses innovation and software to enable small and medium-sized businesses to grow, and USA TODAY NETWORK Ventures, our events division, creates impactful consumer engagements, promotions, and races.

Our website address is www.gannett.com. We use our website as a channel of distribution for important company information, including press releases and other news and presentations, which is accessible on the Investor Relations and News and Events subpages of our website.

Cautionary Statement Regarding Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our ability to enhance our capital structure and refinance our debt facilities, maturity of debt, dilution, tender offers, note repurchases, exchanges and redemptions, availability of future financing, interest expenses, long-term growth and value creation, investments in growth, our partnerships, our runway and ability to repay debt, our transformation and shareholder value. Words such as "expect(s)", "will", “believe(s)”, “anticipate(s)” and similar expressions 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. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations regarding the proposed financing and liability management transactions, or otherwise, will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s 2023 Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Except to the extent required by law, the Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240826546222/en/

For investor inquiries, contact:

Matt Esposito

Investor Relations

703-854-3000

investors@gannett.com

For media inquiries, contact:

Lark-Marie Anton

Chief Communications Officer

646-906-4087

lark@gannett.com

Source: Gannett Co., Inc.

FAQ

What is the size of Gannett's new credit facility with Apollo Funds?

Gannett (GCI) has secured a new senior secured credit facility of up to $900 million with Apollo Funds, comprising an initial term loan of $675 million and a delayed draw facility of $225 million.

How will Gannett use the proceeds from the new credit facility?

Gannett (GCI) will use the proceeds to repay its existing term loan, purchase or redeem the 2026 Notes, and repurchase up to 50% of the outstanding 2027 Notes.

What is the interest rate on Gannett's new Term Loan Facility?

The new Term Loan Facility for Gannett (GCI) will bear interest at an annual rate equal to SOFR plus a margin of 5.0% with a floor of 150 basis points.

How will Apollo Funds exchange their 2027 Notes with Gannett?

Apollo Funds will exchange approximately $441 million of 2027 Notes with Gannett (GCI), with 50% in cash at $1,110 per $1,000 principal and 50% for new 6.0% Senior Secured Convertible Notes due 2031.