Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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Additional 7.750% Senior Secured Notes due 2021
On May 9, 2016, the Company completed the sale of an additional $235.0 million of its 7.750% senior secured notes due 2021 (the
Notes) to qualified institutional buyers and pursuant to Regulation S in a private offering exempt from the registration requirements of the Securities Act. The Notes were issued under an indenture, dated as of February 12, 2013,
among the Company, the Guarantors and the Trustee, as supplemented by the first supplemental indenture, dated as of September 10, 2013, the second supplemental indenture, dated as of April 15, 2014, the third supplemental indenture, dated
as of February 20, 2015, and the fourth supplemental indenture, dated as of the date hereof (as so supplemented, the Indenture). The Notes were issued as additional notes under the Indenture pursuant to which, on February 12,
2013 the Company issued $450.0 million aggregate principle amount of 7.750% senior secured notes due 2021 and on April 15, 2014 the Company issued an additional $150 million aggregate principal amount of 7.750% senior secured notes due 2021
(together, the Existing Notes).
The aggregate net cash proceeds from the sale of the Notes were approximately $236.7 million
after deducting the Initial Purchasers discount and estimated expenses and fees payable by the Company in connection with the Notes offering. The Company intends to use the net cash proceeds from the Note offering for general corporate
purposes, including, but not limited to, additional investments in real estate through the Companys wholly owned subsidiary, New Valley LLC, and in its existing tobacco business.
The Notes will have the same terms except issue date and purchase price and will be treated as the same series as the Existing Notes. Holders
of the Notes and holders of the Existing Notes will vote together as one class under the Indenture. The Company will pay cash interest at a rate of 7.750% per year, payable semi-annually on February 15 and August 15 of each year,
beginning on August 15, 2016. Interest will accrue from February 15, 2016. Interest on overdue principal and interest and liquidated damages, if any, will accrue at a rate that is 1% higher than the then applicable interest rate on the
Notes. The Company will make each interest payment to the holders of record on the immediately preceding February 1 and August 1.
The Notes are fully and unconditionally guaranteed on a joint and several basis by all of the domestic subsidiaries of the Company that are
engaged in the conduct of the Companys cigarette businesses. In addition, some of the guarantees are secured by first or second priority security interests in certain collateral of some of the Guarantors pursuant to security and pledge
agreements, subject to certain permitted liens and exceptions as further described in the Indenture and the security documents relating thereto. The Company will not provide any security for the notes.
The Notes will be the Companys general senior obligations and will be
pari passu
in right of payment with all of the
Companys existing and future senior indebtedness, will be senior in right of payment to all of the Companys future subordinated indebtedness, if any, and will be effectively subordinated in right of payment to all existing and future
indebtedness and other liabilities of the non-Guarantor subsidiaries of the Company (other than indebtedness and liabilities owed to the Company or one of the Guarantors). Each guarantee of the Notes will be the general obligation of the Guarantor
and will be
pari passu
in right of payment with all other senior indebtedness of the Guarantor, including the indebtedness of Liggett Group LLC and 100 Maple LLC under their Third Amended and Restated Credit Agreement with Wells Fargo Bank,
National Association. Each guarantee of the Notes will be senior in right of payment to all future subordinated indebtedness of the Guarantor, if any, and will be effectively senior in right of payment to all existing and future unsecured
indebtedness of the Guarantor to the extent of the value of the assets that secure such guarantee. Each guarantee of the Notes will be effectively subordinated to indebtedness that is secured by a higher priority lien than the lien securing the
guarantee, if any, to the extent of the value of the collateral securing such indebtedness.
The Notes mature on February 15, 2021.
The Company may redeem some or all of the Notes at any time at a make-whole redemption price. On or after February 15, 2016, the Company may redeem some or all of the Notes at a premium that will decrease over time, plus accrued and unpaid
interest and liquidated damages, if any, to the redemption date.
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In the event of a Change of Control (as defined in the Indenture), each holder of the Notes may
require the Company to repurchase some or all of its Notes at a repurchase price equal to 101% of the aggregate principal amount of the Notes plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase. If the Company
sells certain assets and does not apply the proceeds as required pursuant to the Indenture, it must offer to repurchase the Notes at the prices listed in the Indenture.
If an Event of Default (as defined in the Indenture) occurs and is continuing, the Trustee or the holders of at least 25% in aggregate
principal amount of the outstanding Notes may declare the Notes immediately due and payable, except that an Event of Default resulting from a bankruptcy or similar proceeding with respect to the Company or with respect to the Guarantors who,
individually or as a group, would constitute a Significant Subsidiary (as defined in the Indenture) will automatically cause the Notes to become immediately due and payable without any declaration or other act on the part of the Trustee or any Note
holders.
The Indenture contains covenants that limit the Company and each Guarantors ability to, among other things: (i) incur
additional indebtedness; (ii) pay dividends or make other distributions in respect of or repurchase or redeem its equity interests; (iii) prepay, redeem or repurchase its subordinated indebtedness; (iv) make investments; (v) sell
assets; (vi) incur certain liens; (vii) enter into agreements restricting its subsidiaries ability to pay dividends; (viii) enter into transactions with affiliates; and (ix) consolidate, merge or sell all or substantially
all of its assets. These covenants are subject to a number of important exceptions and qualifications, as described in the Indenture.
The
foregoing summary of the Notes and the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, attached hereto as Exhibits 4.1, 4.2, 4.3, 4.4 and 4.5, respectively, and incorporated herein by
reference.