Item 1.01. Entry into a Material Definitive Agreement
On June 7, 2021, Percy Acquisitions LLC ("Holdco"), an indirect subsidiary of
Fortress Transportation and Infrastructure Investors LLC (the "Company"),
entered into a Membership Interest Purchase Agreement (the "Purchase Agreement")
with United States Steel Corporation (the "Seller"), pursuant to which, among
other things, Holdco will purchase 100% of the equity interests of the Seller's
wholly owned short-line railroad subsidiary, Transtar, LLC ("Transtar") from the
Seller, for a cash purchase price of $640 million, subject to certain customary
adjustments set forth in the Purchase Agreement (the "Transaction").
The Purchase Agreement contains customary representations, warranties, and
covenants by the parties, including, among others, covenants (a) by the Seller
regarding the conduct of Transtar's business during the period between the
execution of the Purchase Agreement and closing of the Transaction, (b) by the
Seller and Transtar to effect certain asset transfer and corporate restructuring
transactions, (c) by Holdco to file a Notice of Exemption with the Surface
Transportation Board ("STB") for the final approval, authorization or exemption,
as applicable, of the Transaction and (d) by Holdco and the Seller regarding the
efforts of the parties to cause the Transaction to be completed. In addition,
Holdco and the Seller each agree to indemnify the other party from and after the
closing of the Transaction for losses arising from certain breaches under the
Purchase Agreement and damages for certain other matters as further described in
the Purchase Agreement.
The consummation of the Transaction is subject to certain customary closing
conditions, including, among others, (a) the final approval, authorization or
exemption, as applicable, of the Transaction by the STB, (b) the absence of any
order or applicable law adopted after the date of the Purchase Agreement
enjoining, prohibiting or rendering illegal the consummation of the Transaction,
(c) the absence of any pending legal proceeding commenced by a governmental
authority seeking to enjoin, prohibit or render illegal the consummation of the
Transaction or impose certain material regulatory concessions on Holdco or
Transtar and its subsidiaries, (d) the absence of any order or applicable law
adopted after the date of the Purchase Agreement imposing certain material
regulatory concessions on Holdco or Transtar and its subsidiaries, (e) the
accuracy of each party's representations and warranties contained in the
Purchase Agreement (subject to certain materiality qualifiers) and (f) each
party's performance and compliance in all material respects with their
respective obligations and covenants under the Purchase Agreement. Holdco
intends to obtain third party debt financing to fund the purchase price and has
provided the Seller with customary financing commitment letters, however,
Holdco's receipt of such financing is not a condition to closing of the
Transaction.
Either Holdco or the Seller may exercise certain customary termination rights
under the Purchase Agreement. As described in the Purchase Agreement, in certain
circumstances, Holdco will be required to pay the Seller a termination fee of
$32 million if (a) the parties are unable to consummate the Transaction due to a
failure to obtain approval, authorization or exemption, as applicable, of the
Transaction by the STB or (b) Holdco fails to consummate the closing of the
Transaction on the date it should have otherwise occurred because Holdco's debt
financing is not available.
In connection with the closing of the Transaction, the Seller, on the one hand,
and Transtar or Holdco (or their respective affiliates), on the other hand, will
enter into certain ancillary agreements including, among others, a transition
services agreement and a railway services agreement (the "Railway Services
Agreement"). Under the Railway Services Agreement, for an initial term of 15
years from and after the closing of the Transaction, and subject to periodic
10-year extensions thereafter at the Seller's discretion, with minimum volume
commitments for the first five years, Transtar will continue to provide the
Seller with certain services at the Seller's facilities in and around Gary,
Indiana, Pittsburgh, Pennsylvania, Fairfield, Alabama, Ecorse, Michigan, Lorain,
Ohio and Lone Star, Texas, including but not limited to: railcar maintenance and
repair services, locomotive maintenance, inspection and repair services,
maintenance-of-way services, car management services, and rail and material
handling services.
In connection with the Purchase Agreement, the Company entered into a debt
commitment letter (the "Commitment Letter"), dated as of June 7, 2021, with
Morgan Stanley Senior Funding, Inc. ("Morgan Stanley") and Barclays Bank PLC
("Barclays" and, together with Morgan Stanley, the "Commitment Parties"),
pursuant to which the Commitment Parties have committed to provide the Company
with a senior unsecured bridge term loan facility (the "Bridge Facility") in an
aggregate principal amount of up to $650 million in order to finance the
Transaction and pay fees and expenses related thereto. The funding of the
Bridge Facility is subject to the satisfaction of customary conditions,
including (i) the execution and delivery of definitive documentation with
respect to the Bridge Facility in accordance with the terms set forth in the
Commitment Letter and (ii) the consummation of the Transaction in accordance
with the Purchase Agreement.
The summary of the Purchase Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of Exhibit 10.1 filed
herewith, which is incorporated herein by reference.
The Purchase Agreement has been filed as an exhibit to provide investors and
security holders with information regarding its terms and is not intended to
provide any factual information about Holdco, Transtar or the Seller. The
representations, warranties and covenants in the Purchase Agreement were made
only for the purpose of the Purchase Agreement and solely for the benefit of the
parties to the Purchase Agreement as of specific dates. Such representations,
warranties and covenants may have been made for the purposes of allocating
contractual risk between the parties to the Purchase Agreement instead of
establishing these matters as facts, may or may not have been accurate as of any
specific date, and may be subject to important limitations and qualifications
(including exceptions thereto set forth in any schedules agreed to by the
contracting parties) and may therefore not be complete. The representations,
warranties and covenants in the Purchase Agreement may also be subject to
standards of materiality applicable to the contracting parties that may differ
from those applicable to investors. Investors should not rely on the
representations, warranties and covenants or any descriptions thereof as
characterizations of the actual state of facts or condition of Holdco, Transtar
or the Seller or any of their respective subsidiaries or affiliates. Moreover,
information concerning the subject matter of the representations, warranties and
covenants may change after the date of the Purchase Agreement, which subsequent
. . .
Item 7.01. Regulation FD Disclosure
On June 8, 2021, the Company posted to its website a presentation related to the
Transaction.
In accordance with General Instruction B.2 of Form 8-K, the information
contained in this Item 7.01 is being furnished under Item 7.01 of this Form 8-K
and shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to
the liabilities of that section, nor shall such information and exhibits be
incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.
Item 8.01. Other Events
On June 8, 2021, the Company issued a press release announcing the Transaction.
A copy of the press release is attached hereto as Exhibit 99.1 and is
incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits
9.01(d) Exhibits:
Exhibit No. Description
10.1* Membership Interest Purchase Agreement, dated June 7, 2021, by and
between United States Steel Corporation and Percy Acquisition LLC.
99.1 Press Release, dated June 8, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Company hereby undertakes to furnish supplemental copies of
the omitted schedules and exhibits upon request by the U.S. Securities and
Exchange Commission.
This Current Report on Form 8-K contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Words such as, but not limited to, "will,"
"believes," "expects," "anticipates," "plans," "could," "may," "should," and
similar expressions are intended to identify forward-looking statements.
Forward-looking statements in this current report include, among other things,
statements about the potential benefits of the Transaction; the Company's plans,
objectives, expectations and intentions; the financial condition, results of
operations and business of the Company; and the anticipated timing of the
closing of the Transaction. Risks and uncertainties include, among other things,
risks related to the satisfaction of the conditions of the closing of the
Transaction in the anticipated timeframe or at all; risks related to the ability
to realize the anticipated benefits of the Transaction, including the
possibility that the expected benefits and cost savings from the proposed
Transaction or the capital and operational improvements will not be realized or
will not be realized within the expected time period; disruption from the
Transaction making it more difficult to maintain business and operational
relationships; negative effects of the announcement or the consummation of the
proposed Transaction on the market price of the Company's common shares;
significant transaction costs; unknown liabilities; the risk of litigation
and/or regulatory actions related to the proposed Transaction; other business
effects, including the effects of industry, market, economic, political or
regulatory conditions; future exchange and interest rates; changes in tax and
other laws, regulations, rates and policies; future business combinations or
disposals; and competitive developments. All forward-looking statements rely on
a number of assumptions, estimates and data concerning future results and events
and are subject to a number of uncertainties and other factors that could cause
actual results to differ materially from those reflected in such statements.
Accordingly, the Company cautions that the forward-looking statements contained
herein are qualified by these and other important factors and uncertainties that
could cause results to differ materially from those reflected by such
statements. For more information on additional potential risk factors, please
review the Company's filings with the SEC, including, but not limited to, the
Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and its
Current Reports on Form 8-K.
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