Item 7.01. Regulation FD Disclosure.
The Company does not expect to be able to file the Q2 SEC Report or the Q3 SEC Report by the New Expiration Time, as a result of the Company’s previously disclosed review of certain accounting issues (the “Review”), which is continuing. The Company is unable to predict specific filing dates for the Q2 SEC Report and Q3 SEC Report at this time.
The Company is continuing to engage in negotiations and discussions with certain holders of the Notes (the “Noteholders”) and lenders under the Credit Agreement (the “Lenders”) to seek the consent of (a) Noteholders holding at least a majority of the outstanding aggregate principal amount of the Notes, to amend and/or waive certain provisions of the Indenture or provide further forbearances from exercising remedies in respect thereof and (b) Lenders holding at least (1) a majority of the outstanding loans and revolving commitments under the Credit Agreement and (2) a majority of the revolving commitments under the Credit Agreement, to amend and/or waive certain provisions of the Credit Agreement or provide further forbearances from exercising remedies in respect thereof. In addition, the Company is in negotiations and discussions with certain Lenders, Noteholders and third parties regarding incremental financing to satisfy its liquidity needs until the consummation of the pending infrastructure sale transaction announced by the Company on October 16, 2020 (the “Transaction”). There can be no assurance, however, that the Company will be able to negotiate acceptable terms or reach any
further agreements regarding such consents or incremental financing with the Noteholders, Lenders or any third parties, as applicable.
This Item 7.01 is being furnished and shall not be deemed “filed” for any purpose. This Item 7.01 shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to this Item 7.01 in such filing.
Disclosures About Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and such statements are intended to be covered by the safe harbor provided by the same. These statements are based on the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. The above statements regarding the Company’s negotiations with the Noteholders and Lenders, the potential new financing and the anticipated timing of filing the Q2 SEC Report and Q3 SEC Report constitute forward-looking statements that are based on the Company’s current expectations.
Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause future events to differ materially from those in the forward-looking statements, many of which are outside of the Company’s control. These factors include, but are not limited to, the effects on the Company’s business and clients of general economic and financial market conditions, as well as the following: (i) the Company may fail to satisfy certain covenants relating to financial statement delivery obligations and representations regarding the Company’s financial statements contained in its financing agreements without obtaining an amendment and/or waiver thereof, which may result in (A) events of default under the Indenture and the Credit Agreement, (B) if the Company is unable to obtain further agreements from creditors with respect to forbearing from exercising remedies, the acceleration of the Notes and the Company’s obligations under the Credit Agreement, and (C) the Company being unable to satisfy its obligations thereunder; (ii) the completion of the Review and the completion and filing of the Q2 SEC Report and Q3 SEC Report may take longer than expected as a result of the timing or findings of the Review or the Company’s independent registered public accounting firm’s review process; (iii) existing cash balances and funds generated from operations may not be sufficient to finance the Company’s operations and meet its cash requirements; (iv) the Company is subject to risks associated with the actions of network providers and a concentrated number of vendors and clients; (v) the Company could be subject to cyber-attacks and other security breaches; (vi) the Company’s network could suffer serious disruption if certain locations experience damage or as the Company adds features and updates its network; (vii) the Company is subject to risks associated with purchase commitments to vendors for longer terms or in excess of the volumes committed by the Company’s underlying clients, or sales commitments to clients that extend beyond the Company’s commitments from its underlying suppliers; (viii) the Company may be unable to establish and maintain peering relationships with other providers or agreements with carrier neutral data center operators; (ix) the Company’s business, results of operation and financial condition are subject to the impacts of the COVID-19 pandemic and related market and economic conditions; (x) the Company may be affected by information systems that do not perform as expected or by consolidation, competition, regulation, or a downturn in the Company’s industry; (xi) the Company may be liable for the material that content providers distribute over its network; (xii) the Company has generated net losses historically and may continue to do so; (xiii) the Company may fail to successfully integrate any future acquisitions or to efficiently manage its growth; (xiv) the Company may be unable to retain or hire key employees; (xv) the Company recently announced management changes and is currently conducting an executive search for a new permanent Chief Executive Officer; (xvi) the Company is subject to risks relating to the international operations of its business; (xvii) the Company may be affected by future increased levels of taxation; (xviii) the Company has substantial indebtedness, which could prevent it from fulfilling its obligations under its debt agreements or subject the Company to interest rate risk; (xix) the Company sellers and the buyer of the Company’s business of providing Pan-European, North American, sub-sea and trans-Atlantic fiber network and data center infrastructure services to customers may be unable to obtain the necessary approvals for the Transaction or the related reorganization (the “Reorganization”) or from governmental authorities in a timely manner, on terms acceptable to the sellers and the buyer, or at all; (xx) the Company may be unable to obtain from the Lenders or Noteholders the further forbearances, waivers, consents, releases or other agreements that may be necessary to prevent a default under the Credit Agreement or Indenture that may be necessary to satisfy the conditions to the closing of the Transaction, either on terms acceptable to the Company or at all, in which case the sale and purchase agreement for the Transaction would terminate unless the buyer provides a waiver; (xxi) the Company may not be able to obtain the consent of certain parties to contracts with the sellers and their subsidiaries that will be necessary to fully implement the Transaction or the Reorganization, on terms acceptable to the Company or at all; (xxii) the buyer may be unable to obtain financing sufficient to enable it to consummate the Transaction as required at the closing under the sale and purchase agreement for the Transaction; (xxiii) the potential failure to satisfy other closing conditions under the sale and purchase agreement for the Transaction which may result in the Transaction not being consummated; (xxiv) the potential failure of the Company to realize anticipated benefits of the Transaction; (xxv) risks from relying on the buyer for various critical transaction services and network services for an extended period under the transition services agreement and the master services agreement contemplated by the sale and purchase agreement for the Transaction; (xxvi) the potential impact of announcement
or consummation of the Reorganization and the Transaction on relationships with third parties, including customers, employees and competitors; (xxvii) the ability to attract new customers and retain existing customers in the manner anticipated; and (xxviii) the Company’s internal control over financial reporting may be inadequate or have weaknesses of which the Company is not currently aware or which have not been detected, and which, among other things, could impact the Company’s ability to appropriately provide for the purchase price adjustment mechanisms in the sale and purchase agreement for the Transaction. The foregoing list of factors is not exhaustive. The Company does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements. For a discussion of a variety of risk factors affecting the Company’s business and prospects, see “Risk Factors” in the Company’s annual and quarterly reports filed with the Securities and Exchange Commission (the “SEC”) including, but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2019 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which have been filed with the SEC and are available on the Company’s website (www.gtt.net) and on the SEC’s website (www.sec.gov).