Cenveo offers to swap out 11½% notes for 6% notes due 2024, warrants

By Susanna Moon

Chicago, May 11 – Cenveo Corp. said it began an offer to exchange its outstanding 11½% senior notes due 2017 for newly issued 6% senior notes due 2024 and warrants.

For each $1,000 principal amount, holders will receive $700 principal amount of new notes and warrants, with the number of warrants expected to be between 59 and 75.

The warrants being offered for exchange represent 16.6% of the outstanding common stock and are exercisable at $1.50 per share.

In connection with the exchange, the company has entered into support agreements with each of Allianz Global Investors U.S., LLC and two additional holders of the 11½% notes, in which the supporting holders have agreed to tender $145.8 million principal amount, or about 76.8%, of all outstanding 11½% notes for exchange, according to a company announcement.

The support agreements further provide that the holders will not transfer any of their 11½% notes or take any action that may interfere with, or fail to take any action that may be necessary or appropriate to permit or facilitate, the timely and complete implementation, conduct and completion of the exchange and the supporting noteholder’s obligations to the company under the agreements or any related agreements.

The exchange will end at 11:59 p.m. ET on June 7.

The new notes will be issued in minimum denominations of $2,000 and in integrals of $1,000 after that.

The company also will pay accrued interest.

Tenders under the exchange offer, other than tenders by the supporting noteholders, may be withdrawn before 11:59 p.m. ET on May 23.

Loan amendment

At the same time, the company is seeking to amend its asset-based revolving credit facility to extend the term through 2021 and to reduce the commitments by $50 million. The new maturity date under the ABL facility will be 2021, with a springing maturity of May 2019 ahead of the company's existing 6% senior priority secured notes due 2019 if more than an amount to be determined of the 6% notes remain outstanding at the time, the release said.

Secured note

Concurrently with the ABL amendment, the company and Allianz have agreed to enter into a note purchase agreement for a new $50 million secured note to Allianz, with proceeds to be used to reduce the outstanding principal amount under the ABL facility. The new secured note would be secured by the same collateral that secures the ABL facility, the 6% notes and the company’s 8½% junior priority secured notes due 2022.

With respect to the ABL facility, the new secured note would rank junior with respect to all collateral. With respect to the 6% notes, the new secured note would rank junior with respect to notes priority collateral and senior with respect to ABL facility priority collateral. With respect to the 8½% notes, the new secured note would rank senior with respect to all collateral.

Separate agreement

The company said it has entered into a separately negotiated securities exchange agreement dated May 10 with affiliated noteholders who are not eligible holders.

Under the affiliate exchange agreement, the holders have agreed to tender all of the 11½% notes owned by the affiliated holders in exchange for the issue of new notes and warrants in the same proportion as being offered in the offer.

The affiliated holders cumulatively owned $4,189,000 principal amount, or 2.2%, of the outstanding 11½% notes, as of the date of the agreement.

The exchange is conditioned on the ABL amendment and the issue of the new secured note.

More details

The company and Allianz have agreed to enter into a 7% note purchase agreement, in which the company will purchase all of its 7% senior exchangeable notes due 2017 owned by Allianz as of the settlement date of the offer in exchange for

• Cash equal to the aggregate principal amount of the 7% notes multiplied by 0.6 plus an amount of interest payable at an annual interest rate of 7%, so that the interest accrues through the settlement date;

• Accrued interest in cash; and

• Warrants to purchase 3.3% of the outstanding shares of the common stock as of the settlement date provided that the closing will not occur until the earlier of a date determined by the company and Jan. 31, 2017.

Allianz owns $37,545,000 aggregate principal amount of the 7% notes, or about 77%, of all outstanding 7% notes.

The exchange is open to qualified institutional buyers under Rule 144A.

MacKenzie Partners, Inc. (212 929-5500, 800 322-2885 or proxy@mackenziepartners.com) is the information agent.

Recent news

As reported May 9, Cenveo discussed exchanging a “minority portion” of the 11½% senior notes due 2017 issued by Cenveo Corp. for new notes, but no agreement had been reached at the time.

The proposed transaction, suggested by the holder of the notes, would have resulted in the holder’s 11½% notes being exchanged for new senior notes with “a significantly longer” maturity and “a significantly lower” interest rate than the existing notes. Further, the new notes would have been issued at a “significant discount” to the face value of the 11½% notes.

In addition, Cenveo would have issued detachable warrants to purchase stock at a price “significantly higher” than the current market price of the company’s stock.

Cenveo is a Stamford, Conn.-based manager and distributor of print and related products and services.

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