Consolidated Communications Closes on Stage One of Searchlight Capital Partners’ Investment of $350 Million and Completes Debt Refinancing, Positioning the Company for Long-Term Growth as a Leading Fiber Broadband Provider

Consolidated Communications (NASDAQ: CNSL) (the “Company”) announced today that it has completed the first stage of its previously disclosed investment transaction (the “Investment”) with an affiliate of Searchlight Capital Partners, L.P. (“Searchlight”) and the refinancing of its remaining outstanding debt. In connection with the Investment, affiliates of Searchlight have committed to invest up to an aggregate of $425 million in the Company and the initial $350 million of the Investment was completed today.

Investment Structure

The Investment is structured in two stages. In this first stage, Searchlight invested $350 million in the Company in exchange for 8 percent of the Company’s common stock. In addition, Searchlight has received a contingent payment right (“CPR”) convertible, upon the receipt of certain regulatory and shareholder approvals, into an additional 16.9 percent of the Company’s common stock, and the right to receive an unsecured subordinated note with a principal amount of approximately $395.5 million. In the second stage, upon receipt of FCC and Hart Scott Rodino approvals and the satisfaction of certain other customary closing conditions, Searchlight will invest an additional $75 million and will be issued the note, which will be convertible into shares of perpetual preferred stock of the Company with an aggregate liquidation preference equal to the principal amount of the note at that time. The Company expects to receive FCC approval in mid-2021. In addition, in the second stage and following shareholder approval, the CPR will be convertible into an additional 10.1 percent of the Company’s common stock. Upon completion of both stages, the common stock and CPR issued to Searchlight will represent approximately 35 percent of the Company’s common stock on an as-converted basis.

Board of Directors

The Company also announced its board of directors has appointed Dave Fuller to the board, effective as of the closing of the Investment today and Andrew Frey as a non-voting observer.

Refinancing

In addition, the Company and certain of its wholly-owned subsidiaries completed a global refinancing in which it raised $2.25 billion in new secured debt (including the new revolving credit facility) and retired all of its outstanding debt.

• The new credit agreement consists of a five-year $250 million revolving credit facility and a seven-year term loan in the aggregate amount of $1.25 billion. The term loan extends the Company’s maturity date to late 2027 and is priced at a coupon rate of LIBOR plus 4.75% per annum, with a 1.0% LIBOR floor.
• The Company also raised $750 million aggregate principal amount of 6.500% senior secured notes due 2028.

“We’re very pleased with the strong support from investors and the terms of our refinancing,” said Steve Childers, chief financial officer at Consolidated Communications. “This successful refinancing, combined with the strategic investment, significantly strengthens the balance sheet and aligns with our deleveraging targets. Our new capital structure improves our balance sheet, extends maturities and significantly improves liquidity, all of which provides us with much greater flexibility to support our fiber expansion and growth plan.”

“We are confident our new structure and enhanced strategy, combined with a resilient and stable core business, provide us everything we need to complete the transformation of our Company,” said Bob Udell, president and chief executive officer at Consolidated Communications. “We are pleased to begin our strategic partnership with Searchlight and bring the most competitive broadband services to the people and communities we serve. We have the right team, attractive markets, a robust near-net fiber network, and now the capital structure to allow us to return to revenue growth. Our next era of fiber expansion, which is already underway, will bring significant benefits to consumer, commercial and carrier customers.”

“Searchlight is excited to close the first phase of the transaction, which combined with the debt refinancing, enables Consolidated to immediately increase its investment in fiber,” said Andrew Frey, partner at Searchlight Capital. “We look forward to the long-term partnership with the board and management as we drive value creation for all Consolidated stakeholders.”

Advisors

Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC are serving as financial advisors to Consolidated Communications and Schiff Hardin LLP is serving as legal counsel to Consolidated Communications. J.P. Morgan Securities LLC is serving as lead financial advisor to Searchlight, and Goldman Sachs LLC, Deutsche Bank and TD Securities Inc. have also provided financial advisory services to Searchlight. Wachtell, Lipton, Rosen & Katz is serving as legal counsel, and Wiley Rein LLP is serving as regulatory counsel, to Searchlight.