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New Term Loan carries a significantly lower interest rate and extends maturity to February 2026
Widely syndicated public financing provides the Company with increased operational flexibility
2021 cash interest expense expected to be approximately $90 million less than 2020
Company remains committed to continued debt and leverage reduction
Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") (NYSE: GCI) today announced that Gannett Holdings, LLC, a wholly owned subsidiary of the Company, has priced a $1.045 billion term loan ("Term Loan B"), which will be used to refinance the 11.5% term loan entered into for the acquisition of Gannett Media Corp. The Term Loan B priced at L+700, with a 0.75% LIBOR floor and maturity of February 2026, callable at any time. The new Term Loan B is expected to close early next week and is subject to execution of definitive documentation.
"We are pleased to announce the refinancing of our 11.5% term loan with a widely syndicated L+700 Term Loan B, which meaningfully improves the Company’s balance sheet and overall capital structure," said Michael Reed, Chairman and Chief Executive Officer of Gannett. "The new Term Loan B will save us 375 basis points in annual interest, which is expected to result in approximately $90 million in cash interest savings in 2021 before the benefit of our expected asset sales further reducing debt. Refinancing our original term loan was our number one priority since closing the acquisition of Gannett Media Corp. in November 2019 and we are thrilled to have been able to do so this early into 2021, which is well ahead of our original target date. We will continue to make reducing our outstanding debt a top priority, with a goal of reaching first lien net leverage below 1.0x over the next two years. On the back of our strong preliminary fourth quarter results, we believe we are well positioned to organically grow our cash flows in 2021 and remain confident that we will be able to execute on $100-125 million in additional asset sales this year."
The Term Loan B was arranged by Citigroup Global Markets Inc. and issued at a price of 98 with a maturity of 5 years, bringing the yield-to-maturity to 8.65%. The loan will amortize quarterly at a rate of 10% per annum beginning September 30, 2021. The loan is subject to a financial maintenance covenant, which requires minimum qualified cash of $30 million tested quarterly.
Additionally, the Company plans to issue, simultaneous with the closing of the new term loan, $84 million of the existing 6% senior secured convertible notes due in 2027 in order to refinance an equivalent amount of notes that will be put to the Company in connection with the refinancing. Therefore, the outstanding amount of the existing 6% convertible notes is not expected to change. Following these transactions, total debt outstanding will be $1.545 billion, which will include the $1.045 billion Term Loan B, $497.1 million 6% senior secured convertible notes, and $3.3 million of legacy Gannett Media Corp. 4.75% senior secured convertible notes.
Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused media and marketing solutions company committed to the communities in our network and helping them build relationships with their local businesses. With an unmatched reach at the national and local level, Gannett touches the lives of millions with our Pulitzer-Prize winning content, consumer experiences and benefits, and advertiser products and services. Its portfolio includes the USA TODAY, local media organizations in 46 states in the U.S. and Guam, and Newsquest, a wholly owned subsidiary with over 140 local media brands operating in the United Kingdom. Gannett also owns the digital marketing services companies ReachLocal, Inc., UpCurve, Inc., and WordStream, Inc. and runs the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures, formerly GateHouse Live. To connect with us, visit www.gannett.com.
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, but not limited to, statements regarding the expected terms of the Term Loan B, the expected closing of the Term Loan B, potential interest rate savings, our leverage target for the next two years, our preliminary fourth quarter 2020 results, our ability to execute our operational and integration plans, asset sales, our growth and cash flow expectations and the refinancing of our 6% convertible notes. 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 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 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, 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. 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.
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