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Note 5 - Debt | 12 Months Ended
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Sep. 29, 2019
Notes to Financial Statements |
Debt Disclosure [Text Block] | 5 DEBT On March 31, 2014, we completed a comprehensive refinancing of our debt (the "2014 Refinancing"), which included the following:
| • | $400,000,000 aggregate principal amount of 9.5% Senior Secured Notes (the “Notes”), pursuant to an Indenture dated as of March 31, 2014 (the “Indenture”).
| • | $250,000,000 first lien term loan (the "1 st Lien Term Loan") and $40,000,000 revolving facility (the "Revolving Facility") under a First Lien Credit Agreement dated as of March 31, 2014 (together the “1 st Lien Credit Facility”).
| • | $150,000,000 second lien term loan under a Second Lien Loan Agreement dated as of March 31, 2014 (the “2 nd Lien Term Loan”).
In November 2018, we repaid, in full, the remaining balance of the 1 st Lien Term Loan. In November 2019, we amended our 1 st Lien Credit Facility to amend and extend our $23,120,000 Revolving Facility (the "Amendment") through December 28, 2020. Our Revolving Facility was undrawn at the time of the amendment. Debt is summarized as follows:
|  |  |  |  |  |  |  |  |  | Interest Rates (%) |
|  | September 29 |  |  | September 30 |  |  | September 29 |
(Thousands of Dollars) |  | 2019 |  |  | 2018 |  |  | 2019 |
Revolving Facility |  |  | — |  |  |  | — |  |  |  | 6.13 |
1st Lien Term Loan |  |  | — |  |  |  | 6,303 |  |  |  | 8.54 |
Notes |  |  | 363,420 |  |  |  | 385,000 |  |  |  | 9.50 |
2nd Lien Term Loan |  |  | 80,207 |  |  |  | 93,556 |  |  |  | 12.00 |
|  |  | 443,627 |  |  |  | 484,859 |  |  |  |  |
Unamortized debt issue costs |  |  | (11,282 | ) |  |  | (17,055 | ) |  |  |  |
Less current maturities of long-term debt |  |  | 2,954 |  |  |  | 7,027 |  |  |  |  |
Total long-term debt |  |  | 429,391 |  |  |  | 460,777 |  |  |  |  |
Our weighted average cost of debt, excluding amortization of debt financing costs at September 29, 2019 , is 10.0%. At September 29, 2019 , aggregate minimum required maturities of debt excluding amounts required to be paid from future excess cash flow computations total $ 2,954,000 in 2020, zero in 2021, $ 363,420,000 in 2022 and $ 77,253,000 in 2023. Notes The Notes are senior secured obligations of the Company and mature on March 15, 2022. At September 29, 2019 , the principal balance of the Notes totaled $ 363,420,000 . Interest The Notes require payment of interest semiannually on March 15 and September 15 of each year, at a fixed annual rate of 9.5%. Redemption We may redeem some, or all, of the principal amount of the Notes at any time.
Period Beginning |  | Percentage of Principal Amount |
March 15, 2019 |  |  | 102.38 |
March 15, 2020 |  |  | 100.00 |
If we sell certain of our assets or experience specific kinds of changes of control, we must, subject to certain exceptions, offer to purchase the Notes at 101% of the principal amount. Any redemption of the Notes must also satisfy any accrued and unpaid interest thereon. We may repurchase Notes in the open market at any time. In the 52 weeks ended September 29, 2019 we purchased $ 21,580,000 principal amount of Notes in privately negotiated transactions. The transactions resulted in a loss on extinguishment of debt totaling $ 333,000 in the 52 weeks ended September 29, 2019 which is recorded in Other, net in the Consolidated Statements of Income and Comprehensive Income. Covenants and Other Matters The Indenture and the 1 st Lien Credit Facility contain restrictive covenants as discussed more fully below. However, certain of these covenants will cease to apply if the Notes are rated investment grade by either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Group and there is no default or event of default under the Indenture. 1 st Lien Credit Facility The 1 st Lien Term Loan was paid in full in November 2018 and has no outstanding balance as of September 29, 2019 . The 1 st Lien Credit Facility documents the primary terms of the 1 st Lien Term Loan and the Revolving Facility. The $ 23,120,000 Revolving Facility matures on December 28, 2020 and may be used for working capital and general corporate purposes (including letters of credit). At September 29, 2019 , after consideration of letters of credit, we have approximately $ 17,644,000 available for future use under the Revolving Facility. Interest Interest on the Revolving Facility, which is undrawn at September 29, 2019 , accrues, at our option, at either (A) LIBOR plus 5.5%, or (B) 4.5% plus the higher of (i) the prime rate at the time, (ii) the federal funds rate plus 0.5%, or (iii) one month LIBOR plus 1.0%. Covenants and Other Matters The 1 st Lien Credit Facility requires that we comply with certain affirmative and negative covenants customary for financing of this nature, including a maximum total leverage ratio, which is only applicable to the Revolving Facility. The 1 st Lien Credit Facility restricts us from paying dividends on our Common Stock. This restriction no longer applies if Lee Legacy Leverage is below 3.25x before and after such payments. Lee Legacy Leverage as defined is 4.19x at September 29, 2019. Further, the 1 st Lien Credit Facility restricts or limits, among other things, subject to certain exceptions, the ability of the Company and its subsidiaries to: (i) incur indebtedness, (ii) enter into mergers, acquisitions and asset sales, (iii) incur or create liens and (iv) enter into transactions with certain affiliates. The 1 st Lien Credit Facility contains various representations and warranties and may be terminated upon occurrence of certain events of default. The 1 st Lien Credit Facility also contains cross-default provisions tied to the terms of each of the Indenture and 2 nd Lien Term Loan. 2 nd Lien Term Loan The 2 nd Lien Term Loan, which has a balance of $ 80,207,000 at September 29, 2019 , bears interest at a fixed annual rate of 12.0%, payable quarterly, and matures in December 2022. Principal Payments Excluding excess cash flow payments, there are no scheduled mandatory amortization payments required under the 2 nd Lien Term Loan. Quarterly, we are required to prepare a calculation of excess cash flow of the Pulitzer Subsidiaries ("Pulitzer Excess Cash Flow"). Pulitzer Excess Cash Flow is generally determined as the cash earnings of the Pulitzer Subsidiaries including adjustments for changes in working capital, capital spending, pension contributions, debt principal payments and income tax payments. Pulitzer Excess Cash Flow also includes a deduction for interest costs incurred under the 2 nd Lien Term Loan. Pulitzer Excess Cash Flow is used to prepay the 2 nd Lien Term Loan, at par, and is required to be paid 45 days after the end of the quarter. Payments will also be made on the 2 nd Lien Term Loan, at par, with proceeds from asset sales by the Pulitzer Subsidiaries that are not reinvested subject to certain other conditions. For September 29, 2019 there were no principal payments, and for the year ended , September 30, 2018 we repaid $ 4,000,000, on the 2 nd Lien Term Loan, at par, with net proceeds from the sale of Pulitzer assets. During the 13 and 52 weeks ended September 29, 2019 , payments on the 2 nd Lien Term Loan totaled $ 3,931,000 and $ 13,349,000 respectively. For the 13 weeks ended September 29, 2019 , Pulitzer Excess Cash Flow totaled $ 2,954,000 , which was used to make a payment on the 2 nd Lien Term Loan in November 2019, at par. Voluntary payments under the 2 nd Lien Term Loan are no longer subject to call premiums and are payable at par. The Indenture includes certain restrictions on voluntary payments on the 2 nd Lien Term Loan. Prior to March 31, 2017, we were required to offer the Pulitzer Excess Cash Flow to the 2 nd Lien Lenders to prepay the 2 nd Lien Term Loan at par, which payment the 2 nd Lien Lenders could accept or reject. After March 31, 2017, the 2 nd Lien Lenders can not reject, and Pulitzer Excess Cash Flow is used to prepay the 2 nd Lien Term Loan, at par. Pulitzer Excess Cash Flow payments are required to be paid 45 days after the end of the quarter. Pulitzer Excess Cash Flow and the related payments on the 2 nd Lien Term Loan for the previous four quarters are as follows:
For the Period Ending |  |  |  |  |
(Thousands of Dollars) |  | Pulitzer Excess Cash Flow Payment |  | Payment Date
September 30, 2018 |  |  | 724 |  | Q1 2019
December 30, 2018 |  |  | 1,377 |  | Q2 2019
March 31, 2019 |  |  | 7,317 |  | Q3 2019
June 30, 2019 |  |  | 3,931 |  | Q4 2019
Covenants and Other Matters The 2 nd Lien Term Loan requires that we comply with certain affirmative and negative covenants customary for financing of this nature, including the negative covenants under the 1 st Lien Credit Facility discussed above. The 2 nd Lien Term Loan contains various representations and warranties and may be terminated upon occurrence of certain events of default. The 2 nd Lien Term Loan also contains cross-default provisions tied to the terms of the Indenture and 1 st Lien Credit Facility. In connection with the 2 nd Lien Term Loan, we entered into a Warrant Agreement dated as of March 31, 2014 (the “Warrant Agreement”). Under the Warrant Agreement, certain affiliates or designees of the 2 nd Lien Lenders received on March 31, 2014 their pro rata share of warrants to purchase, in cash, an initial aggregate of 6,000,000 shares of Common Stock, subject to adjustment pursuant to anti-dilution provisions (the “Warrants”). The Warrants represent, when fully exercised, approximately 10.1% of shares of Common Stock outstanding at March 30, 2014 on a fully diluted basis. The exercise price of the Warrants is $4.19 per share. The Warrant Agreement contains provisions requiring the Warrants to be measured at fair value and included in warrants and other liabilities in our Consolidated Balance Sheets. We re-measure the fair value of the liability each reporting period, with changes reported in other, net non-operating income (expense). The initial fair value of the Warrants was $16,930,000. See Note 9 and Note 12. In connection with the issuance of the Warrants, we entered into a Registration Rights Agreement dated as of March 31, 2014 (the “Registration Rights Agreement”). The Registration Rights Agreement requires, among other matters, that we use our commercially reasonable efforts to maintain the effectiveness for certain specified periods of a shelf registration statement related to the shares of Common Stock to be issued upon exercise of the Warrants. Security The Notes and the 1 st Lien Credit Facility are fully and unconditionally guaranteed on a joint and several first -priority basis by each of the Company's material domestic subsidiaries, excluding MNI, the Pulitzer Subsidiaries and TNI (the "Lee Legacy Assignors"), pursuant to a first lien guarantee and collateral agreement dated as of March 31, 2014 ( the "1 st Lien Guarantee and Collateral Agreement"). The Notes, the 1 st Lien Credit Facility and the subsidiary guarantees are secured, subject to certain exceptions, priorities and limitations, by perfected security interests in all property and assets, including certain real estate, of the Lee Legacy Assignors, other than the capital stock of MNI and any property and assets of MNI (the “Lee Legacy Collateral”), on a first -priority basis, equally and ratably with all of the Lee Legacy Assignors' existing and future obligations. The Lee Legacy Collateral includes, among other things, equipment, inventory, accounts receivables, depository accounts, intellectual property and certain of their other tangible and intangible assets. Also, the Notes and the 1 st Lien Credit Facility are secured, subject to certain exceptions, priorities and limitations in the various agreements, by first -priority security interests in the capital stock of, and other equity interests owned by the Lee Legacy Assignors (excluding the capital stock of MNI). The Notes and 1 st Lien Credit Facility are subject to a Pari Passu Intercreditor Agreement dated March 31, 2014. The Notes, the 1 st Lien Credit Facility and the subsidiary guarantees are also secured, subject to permitted liens, by a second -priority security interest in the property and assets of the Pulitzer Subsidiaries that become subsidiary guarantors (the "Pulitzer Assignors") other than assets of or used in the operations or business of TNI (collectively, the “Pulitzer Collateral”). In June 2015 the Pulitzer Assignors became a party to the 1 st Lien Guarantee and Collateral Agreement on a second lien basis. Also, the Notes and the 1 st Lien Credit Facility are secured, subject to certain exceptions, priorities, and limitations in the various agreements, by second -priority security interests in the capital stock of, and other equity interests in, the Pulitzer Assignors and Star Publishing’s interest in TNI. The 2 nd Lien Term Loan is fully and unconditionally guaranteed on a joint and several first -priority basis by the Pulitzer Assignors, pursuant to a Second Lien Guarantee and Collateral Agreement dated as of March 31, 2014 (the “2 nd Lien Guarantee and Collateral Agreement”) among the Pulitzer Assignors and the 2 nd Lien collateral agent. Under the 2 nd Lien Guarantee and Collateral Agreement, the Pulitzer Assignors have granted (i) first -priority security interests, subject to certain priorities and limitations in the various agreements, in the Pulitzer Collateral and (ii) have granted first -priority lien mortgages or deeds of trust covering certain real estate, as collateral for the payment and performance of their obligations under the 2 nd Lien Term Loan. Also, under the 2 nd Lien Guarantee and Collateral Agreement, the Lee Legacy Assignors have granted (i) second -priority security interests, subject to certain priorities and limitations in the various agreements, in the Lee Legacy Collateral, and (ii) have granted second -priority lien mortgages or deeds of trust covering certain real estate, as collateral for the payment and performance of their obligations under the 2 nd Lien Term Loan. Assets of, or used in the operations or business of, MNI are excluded. The rights of each of the collateral agents with respect to the Lee Legacy Collateral and the Pulitzer Collateral are subject to customary intercreditor and intercompany agreements. Other In connection with the 2014 Refinancing, we capitalized $37,819,000 of debt financing costs. Amortization of debt financing costs totaled $ 5,773,103 , $ 4,769,000 and $ 4,447,000 in 2019, 2018 and 2017 , respectively. Amortization of such costs is estimated to total $ 4,105,000 in 2020, $ 4,275,000 in 2021, $ 2,675,000 in 2022 and $227,000 in 2023 . At September 29, 2019 , we have $ 11,282,000 of unamortized debt financing costs recorded as a reduction of Long-term debt in our Consolidated Balance Sheets. During the 52 weeks ended September 29, 2019, we identified an adjustment of $1,309,000 related to debt financing costs that should have been recorded in prior periods. The impact of recording this out of period adjustment was an increase to Debt financing and administrative costs of $1,309,000 in the Consolidated Statements of Operations and Comprehensive Income for the 52 weeks ended September 29, 2019 and an increase to debt of $1,309,000 on the Consolidated Balance Sheet. We do not believe the impact of the adjustment is material to our consolidated financial statements for any previously issued financial statements taken as a whole, or to our net income for the 52 weeks ended September 29, 2019 . Further, the impact of the corrections was not material to any of our Consolidated Balance Sheets nor our Consolidated Statements of Cash Flows. Liquidity At September 29, 2019 , after consideration of letters of credit, we have approximately $ 17,644,000 available for future use under our Revolving Facility. Including cash, our liquidity at September 29, 2019 totals $ 26,289,000 . This liquidity amount excludes any future cash flows. We expect all interest and principal payments due in the next twelve months will be satisfied by existing cash and our cash flows, which will allow us to maintain an adequate level of liquidity. The Warrants, if and when exercised, would provide additional liquidity in an amount u p to $25,140,000 sub ject to a reduction for any amounts the Company may elect to use to repay our 1 st Lien Term Loan and/or the Notes. There are numerous potential consequences under the Notes, 1 st Lien Credit Facility and 2 nd Lien Term Loan, if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise to the right of the applicable lender(s) to exercise their remedies under the Notes, 1 st Lien Credit Facility and 2 nd Lien Term Loan, respectively, including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents. Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to repay, refinance or amend our debt agreements as they become due. The Notes, 1 st Lien Credit Facility and 2 nd Lien Term Loan have only limited affirmative covenants with which we are required to maintain compliance. We are in compliance with our debt covenants at September 29, 2019 .

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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