Sec Form 13D Filing - Searchlight III CVL L.P. filing for Consolidated Communications Holdings Inc. (CNSL) - 2020-10-13

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. )*

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. ☐

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

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Item 1. Security and Issuer.

This statement on Schedule 13D relates to shares of common stock, par value $0.01 per share (“Common Stock”), of Consolidated Communications Holdings, Inc. (the “Issuer”), a Delaware corporation, with principal executive offices at 121 South 17th Street, Mattoon, Illinois 61938.

Item 2. Identity and Background.

(a) – (c), (f)

This Schedule 13D is filed as a joint statement pursuant to Rule 13d-1(k) under the Act by Searchlight III CVL, L.P., a Delaware limited partnership (“Searchlight III CVL”) and Searchlight III CVL GP, LLC, a Delaware limited liability company and the general partner of Searchlight III CVL (“Searchlight III CVL GP” and, together with Searchlight III CVL, the “Reporting Persons”). Eric Zinterhofer is the sole member of Searchlight III CVL GP and directly or indirectly controls the investment and voting decisions of Searchlight III CVL GP. The information required by General Instruction C to Schedule 13D is listed in Annex A hereto and is incorporated herein by reference. Searchlight III CVL GP and Mr. Zinterhofer disclaim beneficial ownership of all of the shares of Common Stock included in this report, and the filing of this report shall not be construed as an admission that either Searchlight III CVL GP or Mr. Zinterhofer is the beneficial owner of any such securities for purposes of Section 13(d) or 13(g) of the Exchange Act or for any other purpose.

The principal business of the Reporting Persons is acquiring, holding and disposing of interests in various companies for investment purposes. The address of the principal office of the Reporting Persons is c/o Searchlight Capital Partners, L.P., 745 5th Avenue – 27th Floor, New York NY 10151.

The Reporting Persons have entered into a Joint Filing Agreement, a copy of which is filed as Exhibit 1 hereto.

(d)-(e)

During the last five years, none of the Reporting Persons or any persons listed in Annex A (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceedings was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3. Source or Amount of Funds or Other Consideration.

On September 13, 2020, the Issuer and Searchlight III CVL entered into an investment agreement (the “Investment Agreement”), pursuant to which Searchlight III CVL agreed to purchase from the Issuer, for aggregate consideration of up to $425 million, (a) shares of Common Stock, (b) a subordinated note with an aggregate principal amount of approximately $395.5 million (the “Note”), which shall initially be non-convertible, but which shall, at the Second Closing of the Investment (as defined in the Investment Agreement), be convertible into shares of a new series of preferred stock, par value $0.01 of the Issuer, to be designated the Issuer’s Series A Perpetual Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and (c) a contingent payment right (the “Contingent Payment Right”) that shall be automatically converted into shares of Common Stock subject to the terms and conditions of the contingent payment right agreement (the “Contingent Payment Right Agreement”), entered into by the Issuer and Searchlight III CVL (such transactions, collectively, the “Investment”).

On October 2, 2020, for an aggregate purchase price of $350 million, Searchlight III CVL completed the purchase of 6,352,842 shares of Common Stock, entered into the Contingent Payment Right Agreement with the Issuer and was issued a contingent payment right representing 17,870,012 shares of Common Stock, and obtained the right to receive the Note at or prior to the Second Closing (such transactions, collectively, the “Initial Closing”).

The sources of funds for these purchases was capital contributions made by the investors in Searchlight III CVL together with available lines of credit.

Item 4. Purpose of Transaction.

The information set forth in Items 3 and 6 hereof is hereby incorporated by reference into this Item 4.

The Reporting Persons acquired beneficial ownership of the Common Stock as described in this Schedule 13D for investment purposes and intend to review their investments in the Issuer on a continuing basis. Subject to the terms of the Investment Agreement, the Governance Agreement (as defined below) and the Registration Rights Agreement (as defined below), and depending on various factors, including but not limited to the Issuer’s financial position and strategic direction, price levels of the Common Stock, conditions in the securities markets, and general economic and industry conditions, the Reporting Persons may in the future take actions with respect to the Investment as they deem appropriate, including changing their current intentions, with respect to any or all matters required to be disclosed in this Schedule 13D.

Pursuant to the Governance Agreement, dated as of September 13, 2020, by and between the Issuer and Searchlight III CVL (the “Governance Agreement”), and effective as of the Initial Closing, the Board of Directors of the Issuer (the “Board”) increased its size from eight to nine members and designees of Searchlight III CVL, David Fuller and Andrew Frey, were appointed as a member of the Board and a non-voting observer, respectively. Effective upon the Second Closing, Searchlight III CVL will be entitled to designate a second director for appointment to the Board, subject to the terms and conditions of the Governance Agreement. For so long as Searchlight III CVL has a director designee serving on the Board, it is required to vote all shares of Common Stock beneficially owned by it pro rata with the Issuer’s stockholders with respect to all director nominees other than Searchlight III CVL’s director designees. For so long as Searchlight III CVL’s As-Converted Common Stock Ownership Percentage (as defined in the Governance Agreement) is at least 5%, Searchlight III CVL will be entitled to appoint one designee as a non-voting observer to the Board.

Pursuant to the Governance Agreement, Searchlight III CVL will be subject to customary standstill restrictions until the earlier of (i) such time that Searchlight III CVL beneficially owns less than 5% of the Common Stock and (ii) the third anniversary of the Initial Closing. Searchlight III CVL will also be subject to customary restrictions on transferring shares of Common Stock and Series A Preferred Stock for a period of three years and four years after the Initial Closing, respectively, and certain other limitations on transfers of Common Stock thereafter.

Subject to the provisions in the Governance Agreement regarding the acquisition of additional shares of Common Stock by the Reporting Persons and transfer restrictions with respect to the securities acquired in connection with the Investment, the Reporting Persons intend to continually review, consider and evaluate their ongoing investment in the Issuer and all potential options with respect thereto. The Reporting Persons may, with or without the assistance of legal and/or financial advisors, engage in communications with, without limitation, one or more shareholders of the Issuer, management of the Issuer, one or more members of the Board, and may make suggestions, recommendations and/or proposals concerning changes to the Issuer’s operations, prospects, business and financial strategies, strategic transactions, assets and liabilities, business and financing alternatives and such other matters as the Reporting Persons may deem relevant to their investment in the Issuer. The Reporting Persons expect that they will, from time to time, review their investment position, with or without the assistance of legal and/or financial advisors, in the Issuer and may, depending on the Issuer’s performance, other market conditions and such other matters as the Reporting Persons may deem relevant, increase or decrease their investment position in the Issuer’s Common Stock and/or invest in the loans or debt or other securities of the Issuer. In addition, the Reporting Persons may, from time to time, purchase Common Stock or loans or other debt securities of the Issuer either in the open market or in privately-negotiated transactions, depending upon the Reporting Persons’ evaluation of the Issuer’s business, prospects and financial condition, the market for the Common Stock or loans or debt or other securities, other opportunities available to the Reporting Persons, general economic conditions, stock market conditions and other factors. Depending upon the factors noted above, the Reporting Persons may also decide to hold or dispose of all or part of their investments in the Issuer and/or enter into derivative transactions with institutional counterparties with respect to the Issuer’s securities, including the Common Stock.

Item 5. Interest in Securities of the Issuer.

(a) and (b)

The information contained on the cover pages of this Schedule 13D is incorporated herein by reference.

As of the date hereof, (i) Searchlight III CVL beneficially owns the shares of Common Stock reported herein, and (ii) Searchlight III CVL GP, because of its position as the general partner of Searchlight III CVL, may, pursuant to Rule 13d-3 of the Act, be deemed to beneficially own the shares of Common Stock reported herein.

With respect to the shares of Common Stock reported herein, each of Searchlight III CVL and Searchlight III CVL GP may be deemed to have sole voting and dispositive power or the sole power to direct the vote and disposition of the number of shares of Common Stock which such Reporting Person may be deemed to beneficially own as set forth herein.

Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission by Searchlight III CVL GP or Mr. Zinterhofer that it is the beneficial owner of any of the shares of Common Stock referred to herein for the purposes of Section 13(d) of the Act, or for any other purpose, and, except to the extent of its pecuniary interest, such beneficial ownership is expressly disclaimed by Searchlight III CVL GP and Mr. Zinterhofer.

(c) The information set forth in Item 3 above is incorporated by reference into this Item 5(c).

(d) Not applicable.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

Item 7. Material to Be Filed as Exhibits.

The following are filed herewith as Exhibits to this Schedule 13D:

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: October 13, 2020

ANNEX A

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