WESTLAKE VILLAGE, Calif., May 29, 2020 /PRNewswire/ -- Guitar Center, Inc. (the "Company") today announced the launch of an exchange offer (the "Exchange Offer") to exchange any and all of its existing 13.000% Cash/PIK Notes due 2022 (the "Existing Notes"), of which there is currently $62,205,340 aggregate principal amount outstanding, for additional 13.000% Cash/PIK Notes due 2022 (the "New Notes") upon the terms and subject to the conditions as set forth in the Confidential Offering Memorandum, dated May 29, 2020 (as it may be supplemented and amended from time to time, the "Offering Memorandum"), and a related Letter of Transmittal.
The Exchange Offer is being made, and the New Notes are being offered and issued, only (i) in the United States to holders of Existing Notes who are "qualified institutional buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")) and (ii) outside the United States to holders of Existing Notes who are persons other than "U.S. persons" (as defined in Rule 902 under the Securities Act) in reliance upon Regulation S promulgated under the Securities Act (collectively, "Eligible Holders").
As further described in the Offering Memorandum, Eligible Holders of Existing Notes will receive, in exchange for a combination of (i) each $1,000 principal amount of Existing Notes validly tendered prior to 5:00 p.m., New York City time, on June 29, 2020 (the "Expiration Date") and accepted by the Company and (ii) $24.288758 as a cash payment per $1,000 principal amount of the Existing Notes validly tendered rounded down to the nearest penny (the "Cash Payment") paid to The Bank of New York Mellon Trust Company, N.A., in its capacity as paying agent, promptly after the Expiration Date but prior to 5:00 p.m., New York City time, on July 2, 2020, $1,035.63 principal amount of New Notes (the "Exchange Consideration").
The Cash Payment represents the equivalent of the cash interest paid by the Company (including any cash paid in respect of defaulted interest) on Existing Notes in respect of the interest payment period ended April 15, 2020 per $1,000 principal amount of Existing Notes. For each $1,000 principal amount of Existing Notes, the Exchange Consideration represents (i) a one-for-one exchange of principal amount of Existing Notes to New Notes, plus (ii) a principal amount of New Notes equal to the amount of cash and PIK interest paid by the Company in respect of the interest payment for the period ended April 15, 2020, plus (iii) a principal amount of New Notes equal to an additional fee for participating in the Exchange Offer. The Exchange Offer will expire on the Expiration Date, unless extended or earlier terminated.
The New Notes and related guarantees, as applicable, will be the Company's and the Company's direct and indirect subsidiaries' (the "Guarantors") senior unsecured obligations and will (i) be effectively subordinated to any of the Company's and the Guarantors' existing and future secured debt, including any of the Company's newly issued 10.000% Senior Secured Superpriority Notes due 2022, the Company's existing 9.500% Senior Secured Notes due 2021 (the "Existing Secured Notes"), and the Company's asset-based revolving credit facility, to the extent of the value of the assets securing such debt, (ii) rank senior in right of payment to any of the Company's and the Guarantors' subordinated indebtedness and equal in right of payment with any of their other senior indebtedness, (iii) be structurally senior to any Existing Notes that remain outstanding after the completion of the Exchange Offer, with respect to the obligations of the Guarantors, and (iv) be structurally subordinated to all obligations and liabilities of any future non-guarantor subsidiaries.
The consummation of the Exchange Offer will be conditioned on the satisfaction of certain conditions described in the Offering Memorandum. The Company will not be required to accept for exchange or to exchange Existing Notes validly tendered pursuant to the Exchange Offer and may, in its sole discretion (subject to applicable laws), terminate, amend or extend the Exchange Offer or delay or refrain from accepting for exchange or exchanging the Existing Notes or transferring any Exchange Consideration for the Existing Notes for any reason, including if any of the conditions as described in the Offering Memorandum shall not have been satisfied or waived by the Company.
The settlement date for the Exchange Offer is expected to occur within five business days following the Expiration Date.
The New Notes have not been registered under the Securities Act or the securities laws of any state and may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the securities referred to herein, nor shall there be any sale of the New Notes, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.
The Company is making the Exchange Offer only to Eligible Holders through, and pursuant to, the terms of the Offering Memorandum and the related Letter of Transmittal. None of the Company, the information agent, the exchange agent, the paying agent, the trustee with respect to the Existing Notes or the trustee with respect to the New Notes or any affiliate of them makes any recommendation as to whether Eligible Holders should tender or refrain from tendering all or any portion of the principal amount of such Eligible Holder's Existing Notes for New Notes in the Exchange Offer. Eligible Holders must make their own decision as to whether to tender Existing Notes in the Exchange Offer and, if so, the principal amount of Existing Notes to tender.
The Exchange Offer is being conducted pursuant to the Transaction Support Agreement, dated May 13, 2020, of the Company with (i) holders of approximately 83.3% of the aggregate principal amount of Existing Notes outstanding as of May 15, 2020, (ii) holders of approximately 63.4% of the aggregate principal amount of Existing Secured Notes outstanding as of May 15, 2020, and (iii) the primary holder of the Company's previously issued $7,043,000 aggregate principal amount of 9.625% Senior Unsecured Notes due 2020.
Documents relating to the Exchange Offer will only be distributed to Eligible Holders who properly complete and return a letter of eligibility confirming that they are within the category of eligible holders for this private exchange offer. Eligible Holders who desire a copy of the letter of eligibility should contact D.F. King & Co., Inc., the information agent for the Exchange Offer, by telephone at (877) 478-5047 (toll free) or (212) 269-5550, or by email at [email protected], or access the letter of eligibility at www.dfking.com/guitarcenter.
About Guitar Center
Guitar Center has been helping people make music for more than 55 years. As the leading retailer of musical instruments, lessons, repairs and rentals in the U.S., Guitar Center operates nearly 300 stores across the U.S. and has one of the top direct sales e-commerce sites in the industry. Guitar Center also provides customers with various musician-based services, including Guitar Center Lessons, where musicians of all ages and skill levels can learn to play a variety of instruments in many music genres; Repairs, an in store modifications, maintenance and repairs service; and Rentals, offering easy rentals of instruments and other live sound and recording gear. Guitar Center's sister brands include Music & Arts, which operates more than 250 stores serving teachers, band directors, college professors and students by providing band and orchestral instruments for sale and rental, as well as band and orchestral instrument lessons. Other brands in the Guitar Center portfolio include the e-commerce sites Musician's Friend, Woodwind Brasswind and Music123.
The Company has included statements in this press release that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act, as amended, and Section 27A of the Securities Act. As a general matter, forward-looking statements are those focused on future or anticipated events or trends, expectations and beliefs including, among other things, the Company's expectations with respect to the Exchange Offer described herein. Such statements are intended to be identified by using words such as "believe," "expect," "intend," "estimate," "anticipate," "will," "project," "plan" and similar expressions in connection with any discussion of future operating or financial performance. Any forward-looking statements are and will be based upon the Company's then-current expectations, estimates and assumptions regarding future events and are applicable only as of the dates of such statements. Readers are cautioned not to put undue reliance on such forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected in this press release for various reasons, including, among others, the ability of the Company to satisfy the conditions to the Exchange Offer and those reasons described in the Offering Memorandum, in the reports and other documents the Company provides to its noteholders from time to time, and in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections contained in the Company's annual report for the fiscal year ended February 1, 2020. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.