Item 3.03. Material Modification of Rights of Security Holders.
As previously disclosed, on September 1, 2021 the Company entered into that
certain Restructuring Support Agreement (the "RSA"), by and among the Company
and certain of its direct and indirect subsidiaries, and certain other
consenting stakeholders parties thereto, to support a restructuring of the
indebtedness and capitalization of the Company and certain of its direct and
indirect subsidiaries pursuant to the terms of the Joint Prepackaged Chapter 11
Plan of Reorganization of GTT Communications, Inc. and its Debtor Affiliates
(the "Prepackaged Plan"). As contemplated by the RSA, on October 31, 2021 (the
"Petition Date"), the Company and its direct and indirect subsidiaries,
Communication Decisions - SNVC, LLC, Core180, LLC, Electra Ltd., GC Pivotal,
LLC, GTT Americas, LLC, GTT Global Telecom Government Services, LLC, GTT
RemainCo, LLC, GTT Apollo, LLC, and GTT Apollo Holdings, LLC (collectively, the
"Debtors") filed voluntary petitions for relief (the "Chapter 11 Cases") under
chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court") to pursue the Prepackaged Plan.
The information set forth below in Item 8.01 of this Current Report on Form 8-K
(this "Form 8-K") regarding the Interim Order (I) Approving Notification and
Hearing Procedures for Certain Transfers of and Declarations of Worthlessness
with Respect to Common Stock; and (II) Granting Related Relief Docket No. 64
(the "Interim NOL Order") is incorporated herein by reference.
Item 8.01. Other Events.
On November 4, 2021, following the hearing of the Bankruptcy Court on the
Debtors' motions for first-day relief on November 3, 2021, the Bankruptcy Court
approved the Debtors' motion (the "Scheduling Motion") for entry of an order
scheduling a combined hearing to consider the adequacy of the disclosure
statement for the Prepackaged Plan (the "Disclosure Statement") and confirm the
Prepackaged Plan ("Combined Hearing"), among other things. The Bankruptcy Court
also approved the form and manner of notice (the "Combined Hearing Notice") of
the Combined Hearing and the deadline established by the Court for objections to
the adequacy of the Disclosure Statement and the confirmation of the Prepackaged
Plan. The Combined Hearing is scheduled for 10:00 a.m. (prevailing Eastern Time)
on December 15, 2021. In accordance with the Scheduling Motion, the Company has
filed the Combined Hearing Notice herewith as Exhibit 99.1 to this Form 8-K.
On November 4, 2021, the Bankruptcy Court also entered the Interim NOL Order.
The Interim NOL Order is designed to assist the Debtors in preserving certain of
their tax attributes by establishing, on an interim basis, among other things,
the procedures (including notice requirements) that restrict certain
transactions involving, and require notices of the holdings of and proposed
transactions by, any person or entity that is or, as a result of such a
transaction, would become a Substantial Stockholder (as defined below) of Common
Stock (and prohibits certain other stockholders that, in the three years
preceding the Petition Date (i.e., the commencement of the Chapter 11 Cases),
beneficially owned at least 20,669,870 shares of the Common Stock (representing
approximately 47.5% of all issued and outstanding shares of the Common Stock as
of the Petition Date) from making declarations of worthlessness with respect to,
the Common Stock) (the "Procedures"). For purposes of the Procedures, a
"Substantial Stockholder" is any entity or individual person that has beneficial
ownership of, after taking into account certain options or other similar rights
to acquire beneficial ownership of Common Stock, at least 2,066,987 shares of
Common Stock (representing approximately 4.75% of all issued and outstanding
shares of the Common Stock as of the Petition Date, after taking into account
the shares transferred pursuant to that certain Stock Transfer Agreement, dated
as of September 1, 2021, by and between the Company and The Spruce House
Partnership, LLC and its affiliates). The terms and conditions of the Procedures
were immediately effective and enforceable upon entry of the Interim NOL Order
by the Bankruptcy Court. Any actions in violation of the Procedures (including
the notice requirements) are null and void ab initio, and (a) the person or
entity making such a transfer will be required to take remedial actions
specified by the Debtors and applicable law to appropriately reflect that such
transfer of the Common Stock is null and void ab initio and (b) the person or
entity making such a declaration of worthlessness with respect to the Common
Stock will be required to file an amended tax return revoking such declaration
and any related deduction to reflect that such declaration is void ab initio.
In addition to the Procedures of the Interim NOL Order, the Common Stock remains
subject to the terms and provisions set forth in the NOL Rights Agreement, dated
as of August 7, 2019 (the "NOL Rights Agreement"), between the Company and
American Stock Transfer & Trust Company, LLC as Rights Agent. The terms and
provisions of the NOL Rights Agreement are set forth in the Company's Current
Report on Form 8-K filed with the SEC on August 8, 2019 and are incorporated by
reference herein.
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The foregoing descriptions of the Combined Hearing Notice and the Interim NOL
Order are not complete and are qualified in their entirety by reference to the
Combined Hearing Notice and the Interim NOL Order, respectively, copies of which
are filed herewith as Exhibits 99.1 and 99.2 and are incorporated herein by
reference.
Additional Information on the Chapter 11 Cases
For Bankruptcy Court filings and other additional information related to the
Chapter 11 Cases available from time to time, please see
https://cases.primeclerk.com/GTT, a website administered by Prime Clerk, a third
party bankruptcy claims and noticing agent (the "Restructuring Website"). The
information on the Restructuring Website is not incorporated by reference into,
and does not constitute part of, this Form 8-K. Interested parties who may have
questions related to the Chapter 11 Cases may call Prime Clerk at (877) 329-1803
or +1 (347) 532-7908 (international) or send an email to GTTInfo@PrimeClerk.com.
Cautionary Note Regarding the Company's Securities
The Company cautions that trading in the Company's securities during the
pendency of the Chapter 11 Cases is highly speculative and poses substantial
risks. Trading prices for the Company's securities may bear little or no
relationship to the actual recovery, if any, by the holders of the Company's
securities in the Chapter 11 Cases. Although the Prepackaged Plan provides for
certain specified treatment to holders of the Notes and the Common Stock as
described in the Company's Current Report on Form 8-K filed with the SEC on
September 2, 2021, the Prepackaged Plan remains subject to confirmation by the
Bankruptcy Court and satisfaction or waiver of the conditions precedent to
effectiveness set forth in the Prepackaged Plan. Furthermore, even if the
Prepackaged Plan is confirmed and becomes effective, the values of the
securities proposed to be issued to holders of the Company's securities are
uncertain. Accordingly, holders of the Company's securities may experience a
significant or complete loss on their investment, depending on the outcome of
the Chapter 11 Cases.
Forward-Looking Statements
This Form 8-K contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and such statements are
intended to be covered by the safe harbor provided by the same. These statements
are based on the current beliefs and expectations of the Company's management
and are subject to significant risks and uncertainties. The above statements
regarding the Prepackaged Plan constitute forward-looking statements that are
based on the Company's current expectations.
Because these forward-looking statements involve risks and uncertainties, there
are important factors that could cause future events to differ materially from
those in the forward-looking statements, many of which are outside of the
Company's control. These factors include, but are not limited to, the effects on
the Company's business and clients of general economic and financial market
conditions, as well as the following: (i) the Company has announced that its
previously issued financial statements for the years ended December 31, 2019,
2018 and 2017, each of the quarters during the years ended December 31, 2019 and
2018 and the quarter ended March 31, 2020 (the "Non-Reliance Periods") and
related disclosures and communications should no longer be relied upon as a
result of preliminary findings of the Company's previously disclosed review of
certain accounting issues (the "Review"); the Company is continuing to finalize
its quantification of the impact of errors identified by the Review on financial
results for the Non-Reliance Periods and the impact may be materially different
than previously disclosed estimates; (ii) the completion of the Review and the
completion and filing of the restated financial statements relating to the
Company's previously issued consolidated financial statements for the
Non-Reliance Periods, its Quarterly Reports on Form 10-Q for the quarters ended
June 30, 2020 and September 30, 2020, its Annual Report on Form 10-K for the
fiscal year ended December 31, 2020, its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2021 and June 30, 2021 and any subsequent delayed
periodic SEC filings may take longer than expected as a result of the timing or
findings of the Review or the Company's independent registered public accounting
firm's review process; (iii) existing cash balances and funds generated from
operations may not be sufficient to finance the Company's operations and meet
its cash requirements; (iv) the Company is subject to risks associated with the
actions of network providers and a concentrated number of vendors and clients;
(v) the Company could be subject to cyber-attacks and other security breaches;
(vi) the Company's network could suffer serious disruption if certain locations
experience damage or as the Company adds features and updates its network; (vii)
the Company is subject to risks associated with purchase commitments to vendors
for longer terms or in excess of the volumes committed by the Company's
underlying clients, or sales commitments to clients that extend beyond the
Company's commitments from its underlying suppliers; (viii) the Company may be
unable to establish and maintain peering relationships with other providers or
agreements with carrier neutral data center operators; (ix) the Company's
business, results of operation and financial condition are subject to the
impacts of the COVID-19 pandemic and related market and economic conditions; (x)
the Company may be affected by information systems that do not perform as
expected or by consolidation, competition, regulation or a downturn in the
Company's industry; (xi) the Company may be liable for the material that content
providers distribute over its network; (xii) the Company has generated net
losses historically and may continue to do so; (xiii)
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the Company may fail to successfully integrate any future acquisitions or to
efficiently manage its growth; (xiv) the Company may be unable to retain or hire
key employees; (xv) the Company recently announced management changes; (xvi) the
Company is subject to risks relating to the international operations of its
business; (xvii) the Company may be affected by tax assessments, unfavorable tax
audit outcomes, delayed tax filings and future increased levels of taxation;
(xviii) the Company has substantial indebtedness, which could prevent it from
fulfilling its obligations under its debt agreements or subject the Company to
interest rate risk; (xix) the potential failure of the Company to realize
anticipated benefits of the sale of the Company's infrastructure division (the
"Sale Transaction"); (xx) risks from relying on Cube Telecom Europe Bidco
Limited (the "Buyer") for various critical transaction services and network
services for an extended period under the transition services agreement and the
master services agreement contemplated by that certain Sale and Purchase
Agreement, dated as of October 16, 2020 (as amended, the "Infrastructure SPA"),
among the Company, its subsidiaries GTT Holdings Limited, Global Telecom and
Technology Holdings Ireland Limited, Hibernia NGS Limited and GTT Americas, LLC
(collectively, the "Sellers") and the Buyer; (xxi) the potential impact of
consummation of the Sale Transaction on relationships with third parties,
including customers, employees and competitors; (xxii) the ability to attract
new customers and retain existing customers in the manner anticipated; (xxiii)
the Company has announced that it expects to report material weaknesses in
internal control over financial reporting and its internal control over
financial reporting may have further weaknesses of which the Company is not
currently aware or which have not been detected; (xxiv) the RSA may be
terminated by certain of its parties if specified milestones are not achieved,
amended or waived, or if certain other events occur; and (xxv) the ability to
obtain relief from the Bankruptcy Court to facilitate the smooth operation of
the Company's businesses during the Chapter 11 Cases and other risks and
uncertainties relating to the Chapter 11 Cases, including but not limited to,
the Company's ability to obtain approval of the Bankruptcy Court with respect to
motions, the effects of the Chapter 11 Cases on the Company and on the interests
of various constituencies, Bankruptcy Court rulings in the Chapter 11 Cases and
the outcome of the Chapter 11 Cases in general, the length of time the Company
will operate under the Chapter 11 Cases, risks associated with third-party
motions in the Chapter 11 Cases, regulatory approvals required to emerge from
chapter 11, the potential adverse effects of the Chapter 11 Cases on the
Company's liquidity or results of operations and increased legal and other
professional costs in connection with the Chapter 11 Cases. The foregoing list
of factors is not exhaustive. The Company does not undertake to update the
forward-looking statements to reflect the impact of circumstances or events that
may arise after the date of the forward-looking statements. For a discussion of
a variety of risk factors affecting the Company's business and prospects, see
"Risk Factors" in the Company's annual and quarterly reports filed with the SEC,
including, but not limited to, its Annual Report on Form 10-K for the year ended
December 31, 2019 and its Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020, which have been filed with the SEC and are available on the
Company's website (www.gtt.net) and on the SEC's website (www.sec.gov).
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
The following exhibits are filed as part of this report:
Number Exhibit
99.1 Combined Hearing Notice.
99.2 Interim NOL Order
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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