Subjects: Share Issue, Business Update
Shutterfly Announces Early Settlement of the Exchange Offer and Consent Solicitation Relating to 8.50% First-Priority Senior Secured Notes due 2026 and Closing of Broader Refinancing Transactions
Shutterfly, LLC (the "Company," "we," "our" and "us") today announced that, on June 9, 2023, Shutterfly Finance, LLC, a subsidiary of the Company (the "New Issuer" or "New Borrower"), closed the initial settlement of its previously announced Refinancing Transactions (as described below), which extended the Company's existing debt maturities and meaningfully improved liquidity.
Early Settlement of Exchange Offer
As part of the Refinancing Transactions, on June 9, 2023 (the "Early Settlement Date"), the New Issuer consummated the initial settlement of its previously announced offer (the "Exchange Offer") to exchange any and all of the Company's outstanding 8.50% First-Priority Senior Secured Notes due 2026 (the "Existing Notes"), together with a required cash payment (as described below), for, at the option of the holder, either (1) new 9.75% First-Priority Senior Secured Notes due 2027 (the "New 1L Notes") of the New Issuer and new 8.50% Second-Priority Senior Secured Cash/PIK Notes due 2027 (the "New 2L Notes") of the New Issuer (the "First Option Consideration") OR (2) new first lien terms loans of the New Borrower under a new first lien credit agreement (such term loans, the "New First Lien Term Loans") and New 2L Notes (the "Second Option Consideration").
On the Early Settlement Date, the New Issuer accepted $734.2 million in aggregate principal amount of Existing Notes, together with the required cash payment, and, in exchange therefor, issued $58.7 million aggregate principal amount of New 1L Notes, $21.4 million aggregate principal amount of New First Lien Term Loans and $660.8 million aggregate principal amount of New 2L Notes.
In addition, as previously announced, as of the Early Participation Time, the New Issuer received the requisite number of consents in the concurrent consent solicitation (the "Consent Solicitation") from holders of the Existing Notes (the "Consenting Noteholders") to adopt the proposed amendments (the "Proposed Amendments") to the indenture governing the Existing Notes (the "Existing Notes Indenture"). The Proposed Amendments became operative on the Early Settlement Date.
The Exchange Offer expired at 5:00 p.m., New York City time, on June 14, 2023 (such time, the "Expiration Time"). The following table sets forth the exchange consideration (the "Exchange Consideration") per $1,000 of Existing Notes validly tendered after the Early Participation Time but at or prior to the Expiration Time and accepted for exchange in the Exchange Offer:
Consideration to be Tendered by Participating
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Exchange Consideration to be Received by Participating Eligible Holders (per $1,000 Principal Amount of Existing Notes Tendered After the Early Participation Time but at or Prior to the Expiration Time) |
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All of such Holder's 8.50% First-Priority Senior Secured Notes due 2026 plus delivery of a Cash Payment Equal to $109.11 per $1,000 principal amount of Existing Notes Tendered(1)(2) |
First Option: (i) $109.11 principal amount of New 1L Notes(3) plus (ii) $870 principal amount of New 2L Notes(4)(5) OR Second Option: (i) $109.11 principal amount of New First Lien Term Loans(6) plus (ii) $870 principal amount of New 2L Notes(4)(5) |
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(1) |
Following the Early Settlement Date, there is $15.8 million in outstanding aggregate principal amount of Existing Notes (CUSIP Nos. 719245 AD4 (144A) and U7189A AB8 (Regulation S)) not tendered in the Exchange Offer. Eligible holders must validly tender (and not validly withdraw) all of such holder's Existing Notes to participate in the Exchange Offer. Partial tenders of Existing Notes will not be accepted. CUSIP information is provided for the convenience of noteholders. No representation is made as to the correctness or accuracy of such numbers. |
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(2) |
For each $1,000 principal amount of Existing Notes validly tendered (and not validly withdrawn), a participating eligible holder must deliver a cash payment of $109.11 (the "Cash Payment") by the Funding Date (as described below). The Cash Payment required to be paid by each participating eligible holder will be rounded down to the nearest $1.00. |
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(3) |
The principal amount of New 1L Notes issued to each participating eligible holder electing First Option Consideration, similar to the Cash Payment paid by each participating eligible holder, will be rounded down to the nearest $1.00. Accordingly, the principal amount of New 1L Notes issued to each participating eligible holder electing First Option Consideration will be equal to the Cash Payment paid by such participating eligible holder, and the principal amount of New 1L Notes issued to any participating eligible holder will be in increments of $1.00. |
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(4) |
Holders of Existing Notes that are tendered after the Early Participation Time and accepted for exchange pursuant to the Exchange Offer will be entitled to receive accrued and unpaid interest in cash on such Existing Notes up to, but excluding, the Early Settlement Date, but not for the period commencing on the Early Settlement Date. |
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(5) |
An eligible participant may elect to receive First Option Consideration or Second Option Consideration with respect to all of the Existing Notes such participant tenders in the Exchange Offer or such participant may elect to receive First Option Consideration with respect to a portion of the Existing Notes tendered and Second Option Consideration with respect to the remaining portion of Existing Notes tendered (in each case, subject to the terms of the Exchange Offer). |
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(6) |
The principal amount of New First Lien Term Loans allocated to each participating eligible holder electing Second Option Consideration, similar to the Cash Payment paid by each participating eligible holder, will be rounded down to the nearest $1.00. Accordingly, the principal amount of New First Lien Term Loans allocated to each participating eligible holder electing Second Option Consideration will be equal to the Cash Payment paid by such participating eligible holder, and the principal amount of New First Lien Term Loans allocated to any participating eligible holder will be in increments of $1.00. In order to be eligible to receive the Second Option Consideration, a participating eligible holder must complete and deliver to Epiq Corporate Restructuring, LLC ("Epiq") the New Lender Documentation (as described in the Offering Memorandum (as defined below)) no later than 11:00 p.m., New York City time, on the Expiration Time. |
Eligible holders who tender their Existing Notes after the Early Participation Time but at or prior to the Expiration Time must deliver the Cash Payment at or prior to 5:00 p.m., New York City time, on June 15, 2023 (such date and time, as the same may be extended, the "Funding Date"). Subject to the satisfaction or waiver of the respective conditions, the Exchange Offer for any Existing Notes validly tendered (and not validly withdrawn) after the Early Participation Time but prior to the Expiration Time is expected to settle on the third business day after the Funding Date (the "Final Settlement Date").
As of the Early Participation Time, the right to withdraw tenders of Existing Notes and related consents expired. Accordingly, Existing Notes tendered for exchange after the Early Participation Time may not be validly withdrawn and consents may no longer be revoked, unless required by applicable law, or the New Issuer determines in the future and in its sole discretion to permit withdrawal and revocation rights.
Closing of Refinancing Transactions
In addition, on June 9, 2023, the Company and the New Issuer consummated the following previously announced transactions (together with the Exchange Offer and Consent Solicitation, the "Refinancing Transactions"):
- Exchanged $1,076.6 million aggregate principal amount of outstanding term loans (the "Existing Term Loans") (or 99.4% of Existing Term Loans) under the Company's Amended and Restated First Lien Credit Agreement, dated as of July 7, 2021 (as modified from time to time, the "Existing Credit Agreement"), together with the required cash payment, for $74.3 million aggregate principal amount of New First Lien Term Loans, $43.2 million aggregate principal amount of New 1L Notes and $968.9 million aggregate principal amount of new second-lien term loans of the New Borrower (the "New Second Lien Term Loans");
- Exchanged $300.0 million aggregate principal amount of revolving credit facility commitments under the Existing Credit Agreement for $277.5 million aggregate principal amount of revolving credit facility commitments at the New Borrower under a new revolving credit facility (the "New Revolving Credit Facility");
- Exchanged all of the Company's 11.00% Senior Notes due 2027 for an equal amount of new senior unsecured PIK notes due 2028 of the New Issuer;
- Refinanced Sherwood Intermediate Holdings, LLC's 8.00% Senior Unsecured Notes due 2024 with new 8.00% Senior Unsecured PIK Notes due 2028 of the New Issuer; and
- Obtained consents from existing lenders under the Existing Credit Agreement to certain amendments thereto.
Following the initial settlement of the Refinancing Transactions (i) the Company's remaining outstanding indebtedness included $15.8 million aggregate principal amount of Existing Notes and $6.3 million aggregate principal amount of Existing Term Loans, and (ii) the New Issuer's outstanding indebtedness included $101.9 million aggregate principal amount of New 1L Notes, $95.7 million aggregate principal amount of New First Lien Term Loans, $660.8 million aggregate principal amount of New 2L Notes, $968.9 million aggregate principal amount of New Second Lien Term Loans, $277.5 million aggregate principal amount of commitments under the New Revolving Credit Facility, $300.0 million aggregate principal amount of 11.00% Senior Unsecured PIK Notes due 2028 and $50.6 million aggregate principal amount of 8.00% Senior Unsecured PIK Notes due 2028.
The consummation of such Refinancing Transactions on June 9, 2023 resulted in gross cash proceeds of $197.6 million to the New Issuer. Subject to the terms of the transaction support agreement, dated as of May 15, 2023 (the "Transaction Support Agreement"), certain financial institutions (the "Backstop Parties") have each agreed to purchase at par its agreed percentage of an aggregate principal amount of New 1L Notes and/or New First Lien Term Loans such that the aggregate principal amount of New 1L Notes and New First Lien Term Loans on the Final Settlement Date equals $200.0 million (the "Backstop Commitment"). The New Issuer expects to loan the net proceeds, after paying transaction fees and expenses, including the Backstop Commitment fee and required repayments under the New Revolving Credit Facility, to the Company by way of an intercompany note. Subject to the terms of the New Revolving Credit Facility, we will be required to use cash in excess of a stated threshold to repay borrowings under the New Revolving Credit Facility.
In connection with the consummation of the Refinancing Transactions, on June 9, 2023, the Company contributed, licensed, assigned or otherwise transferred certain intellectual property and consumer data assets to the New Issuer or its direct subsidiary.
The consummation of the Exchange Offer on the Final Settlement Date is conditioned upon the satisfaction or waiver of the conditions set forth in an offering memorandum, dated as of May 15, 2023 (the "Offering Memorandum"). Subject to applicable securities laws and the terms set forth in the Offering Memorandum and in the Transaction Support Agreement, we reserve the right to waive any and all conditions to the Exchange Offer in our absolute and sole discretion, and may do so, subject to applicable securities laws, without reinstating withdrawal rights. Subject to the terms of the Transaction Support Agreement and applicable law, we reserve the right to extend or terminate the Exchange Offer in our sole and absolute discretion, and to otherwise amend or modify the Exchange Offer in any respect.
The Exchange Offer is being made, and the New 1L Notes and the New 2L Notes, are being offered, and will be issued only: (i) to holders of Existing Notes who are (x) reasonably believed to be "qualified institutional buyers" (as defined in Rule 144A under the Securities Act of 1933 (the "Securities Act")) or (y) institutional "accredited investors" within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act and (ii) outside the United States, to holders of Existing Notes who are not "U.S. persons" (as defined in Rule 902 under the Securities Act) in reliance on Regulation S of the Securities Act. The holders of Existing Notes who are eligible to participate in the Exchange Offer pursuant to at least one of the foregoing conditions are referred to as "eligible holders."
The New Issuer is making the Exchange Offer and the Consent Solicitation only to eligible holders through, and pursuant to, the terms of the Offering Memorandum. The complete terms and conditions of the Exchange Offer are set forth in the Offering Memorandum. None of the Company, the New Issuer, the Guarantors (as defined in the Offering Memorandum), Epiq or any other person takes any position or makes any recommendation as to whether or not eligible holders should participate in the Exchange Offer or deliver Consents pursuant to the Consent Solicitation.
Only eligible holders may receive a copy of the Offering Memorandum and participate in the Exchange Offer and the Consent Solicitation. We have retained Epiq to act as transaction agent for the Exchange Offer and Consent Solicitation. Holders of Existing Notes wishing to certify that they are eligible holders in order to be eligible to receive a copy of the Offering Memorandum should complete the eligibility letter and return it to Epiq as directed therein. Holders of Existing Notes may complete the eligibility letter on-line or obtain a PDF copy of the eligibility letter by following the link at https://epiqworkflow.com/cases/ShutterflyEL. The eligibility letter can be returned via the online portal or by emailing a scan of both pages of the fully completed letter to Epiq at [email protected] and referencing "Shutterfly" in the subject line. Once your response has been reviewed and cleared by Epiq, you will receive the Offering Memorandum from Epiq by email.
This communication is for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security and does not constitute an offer, solicitation or sale of any security in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Exchange Offer is being made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, has not been registered with the SEC and relies on exemptions under state securities laws.
About Shutterfly
Shutterfly and its family of brands make up one of the leading e-commerce companies for personalized products and custom design. Shutterfly and its family of brands are organized into three divisions: Consumer, Lifetouch and Shutterfly Business Solutions. Shutterfly is majority-owned by certain investment funds managed directly or indirectly by Apollo Global Management, Inc. and its subsidiaries and affiliates.
Forward-Looking Statements
This press release contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "target," "will," "would" and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding the final settlement of the Exchange Offer and the funding of the Backstop Commitment, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. These risks, as well as other risks and uncertainties, include those detailed in the section "Risk Factors" included in the Offering Memorandum and in the Annual Report for the year ended December 31, 2022 of Photo Holdings, LLC (the "2022 Annual Report"), the indirect parent company of the Company and the New Issuer. Important factors that could cause our results to vary from expectations are set forth more fully in the Offering Memorandum and our 2022 Annual Report. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We assume no obligation to update any of the forward-looking statements after the date of this press release or to compare these forward-looking statements to actual results.
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