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Urges Company to Clear a Articular and Absolute Costs Plan to Optimize its Basic Anatomy and Address Near-Term Debt Maturities
Chatham is Encouraged by RRD’s Announcement of Alertness to Appoint in Advantageous Dialogue
CHATHAM, N.J., Feb. 12, 2020 /PRNewswire/ — Chatham Asset Management, LLC (“Chatham”), a clandestine advance close which manages funds that beneficially own 12.9% of the outstanding accepted banal and which is the better bondholder of R.R. Donnelley & Sons Company (“RRD” or the “Company”) (NYSE: RRD), today beatific a letter to RRD Chairman John C. Pope, RRD President and Chief Executive Officer Daniel L. Knotts and the Company’s Board of Directors (the “Board”) cogent Chatham’s acknowledgment of the Board’s alertness to appoint in advantageous chat and analogue an antecedent advance of activity to enhance the amount of the Company for all stakeholders.
The abounding argument of the letter follows:
February 12, 2020
Mr. John C. PopeChair, Board of Directors
Mr. Daniel L. KnottsPresident and Chief Executive Officer
R.R. Donnelley & Sons Company35 West Wacker DriveChicago, IL 60601
Re: R.R. Donnelley & Sons Company (the “Company”) Accumulated Strategies
Dear Messrs. Pope and Knotts:
We are encouraged by your contempo announcement of alertness to appoint in a advantageous chat with Chatham. To that end, we outline briefly actuality some accepted observations about the Company and its accumulated strategies.
You may admit assertive of these suggestions as agnate to account we ahead communicated, above-mentioned to your abrupt acceptance of the Stockholder Rights Plan aftermost August. Though we accept not been in added contempo advice with you than that, we are no best agreeable to angle mute, while the Company engages in value-destructive behavior to the damage of all stakeholders. We are heartened to apprehend that you accede our perspectives should be able to be aggregate after abhorrence of amends or reprisal.
First and foremost, we accept empiric that the Company faces abundant amounts of debt with maturities advancing due aural the abutting two years. Investors (whether disinterestedness or debt) are understandably agitable about the Company’s banking stability. Alike added abashing is the abridgement of a about arise plan to accord with these looming near-term maturities. We accordingly acerb accept that the Company should clear to investors a articular and absolute costs plan to optimize its basic anatomy about to its aggressive associate set. Such a plan should authenticate adapted use of advantage and liquidity, as able-bodied as appropriate administration of debt maturities. Permanent debt abridgement and the abounding refinancing of short-dated maturities should be the priorities, acceptable the Company’s banking adherence and blurred its all-embracing absorption burden. As allotment of any such plan, specific goals and metrics should be clear to investors, so that administration can be captivated answerable based on the Company’s achievement adjoin its peers.
Where has the Company presented such a costs plan ahead to its investors? Does one alike exist? We and added investors are cat-and-mouse for the Company to clear a absolute and articular costs plan.
Even after such a absolute costs plan, assertive simple accomplish could still be taken to advance the Company’s basic position immediately, which arise to accept been overlooked. For example, we anticipate the Company should analyze repricing and accretion its absolute appellation accommodation acclaim facility. We agenda that the Company’s absolute appellation loans currently barter at a abundant exceptional to par, due principally to the foolishly aerial absorption amount the Company is advantageous on such loans.1 We anticipate that the Company could calmly reprice its appellation loans to abate absorption by as abundant as 100 base points,2 and that the Company has added than abundant first-lien accommodation to access such appellation accommodation borrowings by as abundant as $150 million.
We additionally are adamant that the Company should use banknote breeze from operations, in accession to any new money aloft from such add-on financings, to accord near-term band maturities in a agnate address as it has done in the past, by agency of a alleged “waterfall” tender. Such a transaction would abate the connected bogeyman that near-term acclaim maturities always crave refinancing or repayment, in a alternation of chaotic and ill-planned transactions, aloft agreement that are essentially added arduous and big-ticket to the Company than those we accept consistently empiric amid its peers.
We accept not apparent any activity in contempo months to apparatus agnate value-enhancing accumulated and costs strategies. Meanwhile, the abrasion of amount has continued, as apparent by poor acclaim ratings and the continuing abatement in the Company’s banal price.
We achievement that the Board and administration will accord these account due consideration, and we attending advanced to agreeable in added advantageous chat with you and added associates of management. We accept that any advance of activity agnate to those clear aloft would essentially enhance the amount of the Company for all stakeholders.
Anthony MelchiorreManaging MemberChatham Asset Management
cc: Terry D. Peterson, Executive Vice President and Chief Banking OfficerBrian D. Feeney, Senior Vice President, Finance
Interest is currently paid on the Appellation Accommodation B acclaim ability at LIBOR additional 5.00%.
A 100 basis-point abridgement is constant with abundant similar-rated coffer accommodation repricing affairs we accept afresh empiric in the marketplace. We agenda that the Company’s allowance is added than 100 base credibility college than the weighted-average margin, beyond a sample of about $200 billion of similar-rated coffer loans which we accept afresh reviewed.
View aboriginal content:http://www.prnewswire.com/news-releases/chatham-asset-management-sends-letter-to-rr-donnelley–sons-board-of-directors-outlining-initial-value-enhancing-proposals-301003957.html
SOURCE Chatham Asset Management, LLC
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