Shutterfly settles early exchange tenders and broader refinancings

Chicago, June 14 – Shutterfly LLC announced in a press release that the early settlement for its exchange offer and consent solicitation relating to its $750 million outstanding 8½% first-priority senior secured notes due 2026 (Cusips: 719245AD4, U7189AAB8) closed on June 9, with the initial settlement of other previously announced refinancing transactions.

Exchange offer

Pursuant to the exchange offer, Shutterfly exchanged $734.2 million of the existing notes for $58.7 million of new first-priority senior secured notes due 2027, $21.4 million of new first-lien term loans and $660.8 million of new second-lien notes.

Noteholders had two options, based on an exchange of $109.11 in cash and then newly issued debt for each $1,000 note issued by Shutterfly Finance, LLC.

As a catch, though, participating eligible holders also had to deliver a cash payment of $109.11 by the funding date, rounded down to the nearest $1.00.

First, noteholders could elect to receive $109.11 of new 9¾% first-priority senior secured notes due 2027 and $900 of new 8½% second-priority senior secured cash/PIK notes due 2027.

Alternatively, as a second option, noteholders could receive $109.11 of new first-lien term loans of the new borrower under a first-lien credit agreement and $900 of new second-priority notes.

After the early deadline, under each option there would be $30 less of new second-priority notes.

Accrued interest was paid in cash up to the initial settlement date (but not the final settlement date).

Noteholders who tendered after the early participation time but before the expiration time must deliver their cash payment before 5 p.m. ET on June 15.

Consent solicitation

As of the early participation time, the new issuer previously reported receiving the requisite number of consents in the concurrent consent solicitation from holders of the existing notes to adopt the proposed amendments to the indenture governing the existing notes to eliminate substantially all of the restrictive covenants in the existing notes’ indenture and make certain other changes. Noteholders could not consent without participating in the exchange offer.

At least a majority of noteholders were required to consent.

The supplemental indenture became operative on the early settlement date of June 9.

Support

The company entered into a transaction support agreement on May 15 with holders of approximately 74% of the existing notes.

Those noteholders agreed to tender their notes and participate in the offer by the early participation time.

Term loan lenders

Further, Shutterfly worked with lenders representing more than 80% of the total amount of outstanding term loans under the company’s amended and restated first-lien credit agreement from July 7, 2021.

Lenders of existing term loans were being offered a similar choice, namely they could acquire a pro rata amount of either new first-lien term loans or new first-priority notes and exchange $1,000 principal amount of existing term loans for $900 of new second-lien term loans under a new second-lien credit agreement.

Revolving credit facility lenders had the option to exchange their commitments into revolving commitments of the new borrower, subject to a 7.5% reduction in their commitments.

Lenders agreed that all holders of existing notes may participate in the exchange offer and have agreed to the consent solicitation.

Accordingly, on June 9 Shutterfly exchanged $1,076,600,000 of existing terms, or 99.4% of existing term loans, together with the required cash payment, for $74.3 million new first-lien term loans, $43.2 million new first-lien notes and $968.9 million new second-lien term loans of the new borrower.

Shutterfly also exchanged $300 million of revolving debt under the existing credit agreement for $277.5 million of new revolving debt under a new facility.

Other agreements

As a side notes, pursuant to the agreements, all of the company’s 11% senior notes due 2027 were exchanged for an equal amount of new senior PIK notes due 2028 of the new issuer.

The maturity of Sherwood Intermediate Holdings, LLC’s 8% senior notes due 2024 was extended and the notes were refinanced with new 8% senior unsecured PIK notes due 2028 of the new issuer.

Backstop

Certain financial institutions, under the transaction support agreement, agreed to purchase at par its agreed percentage of an aggregate principal amount of new first-priority notes and/or new first-lien term loans so that the total principal amount of debt between the two equals $200 million in cash proceeds.

The proceeds were to be loaned by the new issuer to the company via an intercompany note.

Cash received in excess of a stated threshold must be used to repay borrowings under the new revolving credit facility.

Conditions

The exchange offer and consent solicitation were conditioned on participation from holders of a majority of the notes, the receipt of the requisite consents in the solicitation, the closing of the credit facilities exchange and the substantially concurrent satisfaction or waiver of any or all of the other conditions set forth in the offering memorandum.

Details

The exchange offer expired at 5 p.m. ET on June 14 with the related cash payments due by 5 p.m. ET on June 15, as stated above.

Holders of existing notes have been asked to complete an eligibility letter.

Settlements are expected to take place three days after each deadline.

Epiq Corporate Restructuring, LLC is the transaction agent for the exchange offer and consent solicitation.

Shutterfly is a Redwood City, Calif.-based manufacturer and seller of customizable photo-based products and services.

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