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Note 5 - Debt | 6 Months Ended
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Mar. 29, 2020
Notes to Financial Statements |
Debt Disclosure [Text Block] |
5 | DEBT
On March 16, 2020 in connection with the closing of the Transactions, the Company completed a comprehensive refinancing of its debt (the “2020 Refinancing”). The 2020 Refinancing consists of a 25 -year term loan with BH Finance LLC (“BH Finance”), an affiliate of Berkshire, in an aggregate principal amount of $ 576,000,000 at a 9% annual rate (referred to herein as “Credit Agreement” and “Term Loan”). The proceeds of the Term Loan were utilized, along with cash on hand, to refinance the Company's $431,502,000 in existing debt as well as the acquisition of the BH Media Newspaper Business assets and the stock of the Buffalo News for $140,000,000 in cash. With the closing of this deal, BH Finance became Lee's sole lender. Proceeds of the Term Loan were used to finance the Transactions and refinance all of the Company’s outstanding debt at par, including:
| • | To redeem the 9.5% senior secured notes (“Notes”) pursuant to an indenture dated as of March 31, 2014 ( the “Indenture”);
| • | To repay the 12.0% second lien term loan pursuant to a Second Lien Term Loan Agreement dated as of March 31, 2014, as amended (the “2 nd Lien Term Loan”).
There was no gain or loss recognized upon extinguishment of the Indenture and the 2nd Lien Term Loan. As a result of the 2020 Refinancing, the Indenture, First Lien Credit Agreement dated as of March 31, 2014 ( the “1 st Lien Credit Facility”) and 2 nd Lien Loan Agreement were terminated, and BH Finance is the Company’s sole lender. The Credit Agreement documents the primary terms of the Term Loan. The Term Loan matures on March 16, 2045. Debt is summarized as follows:
|  |  | March 29, |  |  |  | September 29, |  |  |  | Interest |
(Thousands of Dollars) |  | 2020 |  |  | 2019 |  |  | Rates (%) |
Term Loan |  |  | 576,000 |  |  |  | — |  |  |  | 9.0 |
Revolving Facility |  |  | — |  |  |  | — |  |  |  | — |
Notes |  |  | — |  |  |  | 363,420 |  |  |  | 9.5 |
2nd Lien Term Loan |  |  | — |  |  |  | 80,207 |  |  |  | 12.0 |
|  |  | 576,000 |  |  |  | 443,627 |  |  |  |  |
Unamortized debt issue costs |  |  | — |  |  |  | (11,282 | ) |  |  |  |
Less current maturities of long-term debt |  |  | — |  |  |  | 2,954 |  |  |  |  |
Total long-term debt |  |  | 576,000 |  |  |  | 429,391 |  |  |  |  |
As part of our refinancing, we incurred approximately $417,000 in debt financing costs, which are reflected in Debt financing and administrative costs. On March 16, 2020, we recognized $9,583,000 in Debt financing and administrative costs related to previously unamortized debt issuance costs related to extinguished debt. Our weighted average cost of debt at March 29, 2020 is 9.0 %. At March 29, 2020 , there are no required debt payments. Future payments are contingent on the Company’s ability to generate future excess cash flow, as defined in the Credit Agreement. Interest Interest on the Term Loan bears interest at a fixed annual rate of 9.0 %, payable monthly, and matures in March 2045. Principal Payments Voluntary payments under the Credit Agreement are not subject to call premiums and are payable at par. Excluding the Excess Cash Flow payments described below, there are no scheduled mandatory principal payments required under the Credit Agreement. The Company is required to make mandatory pre-payments of the Term Loan as follows:
| • | The Company must prepay the Term Loan in an aggregate amount equal to 100% of any Net Cash Proceeds received by the Company or any subsidiary from a sale, transfer, license, lease or other disposition of any property of the Company or any subsidiary in excess of $500,000 in any ninety ( 90 ) day period.
| • | Beginning on June 28, 2020, the Company is required to prepay the Term Loan with excess cash flow, defined as cash on the balance sheet in excess of $20,000,000 (“Excess Cash Flow”). Excess Cash Flow is used to prepay the Term Loan, at par, and is due within 50 -days of quarter end.
| • | If there is a Change of Control (as defined in the Credit Agreement), BH Finance has the option to require the Company to prepay the Term Loan in cash equal to 105% of the unpaid principal balance, plus accrued and unpaid interest.
During the 13 and 26 weeks ended March 29, 2020 , payments on the Term Loan totaled $0 . The Company may, upon notice to BH Finance, at any time or from time to time, voluntarily prepay the Term Loan in whole or in part, at par, provided that any voluntary prepayment of the Term Loan shall be accompanied by payment of all accrued interest on the amount of principal prepaid to the date of prepayment . Covenants and Other Matters The Credit Agreement contains certain customary representations and warranties, certain affirmative and negative covenants and certain conditions, including restrictions on incurring additional indebtedness, creating certain liens, making certain investments or acquisitions, issuing dividends, repurchasing shares of stock of the Company and certain other capital transactions. Certain existing and future direct and indirect material domestic subsidiaries of the Company are guarantors of the Company’s obligations under the Credit Agreement. The Credit Agreement restricts us from paying dividends on our Common Stock. This restriction does not apply to dividends issued with the Company’s Equity Interests or from the proceeds of a sale of the Company’s Equity Interests. Further, the Credit Agreement restricts or limits, among other things, subject to certain exceptions, the ability of the Company and its subsidiaries to: (i) incur additional indebtedness, (ii) make certain investments, (iii) enter into mergers, acquisitions and asset sales, (iv) incur or create liens and (v) enter into transactions with certain affiliates. The Credit Agreement contains various representation and warranties by the Company and may be terminated upon the occurrence of certain events of default, including non-payment. The Credit Agreement also contains cross-default provisions tied to other agreements with BH Finance entered into by the Company and its subsidiaries in connection with the 2020 Refinancing. Security The Term Loan is fully and unconditionally guaranteed on a joint and several first -priority basis by the Company's material domestic subsidiaries (excluding MNI and TNI, the “Subsidiary Guarantors”), pursuant to a Guarantee and Collateral agreement dated as of March 16, 2020 ( the “Guarantee and Collateral Agreement”). The Term Loan and the subsidiary guarantees are secured, subject to certain exceptions, priorities and limitations, by perfected security interests in substantially all property and assets, including certain real estate, of the Company and the Subsidiary Guarantors. Also, the Term Loan is 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 Company and the Subsidiary Guarantors (excluding the capital stock of MNI and TNI). Liquidity Pursuant to the terms of the Credit Agreement, our new debt does not include a revolver. As part of the Credit Agreement, by June 30, 2020 we are required to cash collateralize all letters of credit which were previously collateralized by a revolving credit facility. Including cash, our liquidity at March 29, 2020 totals $ 30,824,000 . 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 up to $ 25,140,000 , which is not considered in the calculation of Excess Cash Flow. There are numerous potential consequences under the 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 BH Finance to exercise their remedies under the credit agreement 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 New Debt has only limited affirmative covenants with which we are required to maintain compliance and there are no leverage or financial performance covenants. We are in compliance with our debt covenants at March 29, 2020 . Warrants 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 10.4% 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 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.

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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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