Offering Memorandum Not for general circulation in the United States
International Game Technology PLC €500.0 million 3.500% Senior Secured Notes due 2024
International Game Technology PLC, a public limited company incorporated under the laws of England and Wales (the “Issuer”), is offering (the “Offering”) €500.0 million aggregate principal amount of 3.500% Notes due 2024 (the “Notes”). The Notes will bear interest at a rate of 3.500% per annum from the date of original issuance, payable semi-annually in arrears on January 15 and July 15 in each year commencing on January 15, 2019 (the “Interest Payment Date”). The maturity date of the Notes is July 15, 2024. The Notes will rank pari passu in right of payment to all existing and future indebtedness of the Issuer that is not subordinated in right of payment to the Notes and will rank senior in right of payment to indebtedness that is subordinated in right of payment to the Notes. The Notes will be guaranteed (the “Guarantees”) on a senior basis by certain subsidiaries of the Issuer (the “Guarantors”). The Guarantees will be secured and will rank pari passu in right of payment with all of the Guarantors’ existing and future indebtedness that is not subordinated in right of payment to the Guarantees and will rank senior in right of payment to indebtedness that is subordinated in right of payment to the Guarantees. The Notes will be secured within 90 days of the Issue Date (as defined herein) by a first ranking security interest in the following (the “Notes Collateral”): (i) the issued and outstanding shares of common stock of IGT US HoldCo (as defined herein) and the quotas of the Italian Guarantor (as defined herein); and (ii) intercompany loans or notes in excess of $10.0 million (x) with respect to which an obligor under the Revolving Credit Facilities Agreement (as defined herein) or the Term Loan Facility Agreement (as defined herein) is the creditor and the Issuer or a subsidiary of the Issuer is a debtor, (y) with respect to which the Issuer or any subsidiary of the Issuer is a creditor and an obligor under the Revolving Credit Facilities Agreement or the Term Loan Facility Agreement is a debtor. The Guarantees will be secured (within 90 days of the Issue Date) on the first ranking security interest in the following (the “Guarantee Collateral” and together with the Notes Collateral, the “Collateral”): intercompany loans or notes in excess of $10.0 million (x) with respect to which an obligor under the Revolving Credit Facilities Agreement or the Term Loan Facility Agreement is the creditor and the Issuer or a subsidiary of the Issuer is a debtor, (y) with respect to which the Issuer or any subsidiary of the Issuer is a creditor and an obligor under the Revolving Credit Facilities Agreement or the Term Loan Facility Agreement is a debtor. The Collateral also secures on a pari passu basis the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes (as defined herein) and the Existing IGT US HoldCo Notes (as defined herein) (which are required to be secured only to the extent the Collateral constitutes property or assets of IGT US HoldCo or a subsidiary of IGT US HoldCo) and may also secure certain future indebtedness on an equal and ratable basis to the Notes. The security interest in the Collateral will be granted subject to the terms of the Intercreditor Agreement, certain agreed security principles and terms of the security documents. See “Description of Other Indebtedness—Intercreditor Agreement.” Prior to January 15, 2024, the Issuer may at its option redeem some or all of the Notes by paying a “make-whole” premium, plus accrued and unpaid interest and additional amounts, if any. After such date, the Issuer may at its option redeem some or all of the Notes at par, plus accrued and unpaid interest. Further, the Issuer may redeem all of the Notes at a price equal to their principal amount plus accrued and unpaid interest and additional amounts, if any, upon the occurrence of certain changes in tax law. Upon the occurrence of certain events constituting a change of control as defined in the Indenture, the Issuer may be required to make an offer to repurchase all of the Notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any. See “Description of the Notes” for further information. This Offering Memorandum is to be read in conjunction with the 2017 Annual Report on Form 20-F (as defined herein) and the Report on Form 6-K (as defined herein) (see “Important Information about this Offering Memorandum” and “Incorporation by Reference” below) and such documents are incorporated by reference in, and form part of, this Offering Memorandum. There is currently no public market for the Notes. Euronext Dublin (as defined herein) approves this Offering Memorandum as Listing Particulars (the “Listing Particulars”). Application has been made to Euronext Dublin (as defined herein) for the Notes to be listed on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market of Euronext Dublin. The Global Exchange Market is not a regulated market for the purposes of Directive 2014/65/EU (as defined herein). No assurance can be given that the application will be granted. Furthermore, listing of the Notes to the Official List of Euronext Dublin and admission to trading on the Global Exchange Market is not an indication of the merits of the Issuer, the Guarantors, the Notes or the Guarantees. There can be no assurance that a trading market in the Notes will develop or be maintained. Investing in the Notes involves certain risks. See “Risk Factors” beginning on page 20. None of the Notes have been or will be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities laws of any other jurisdiction. The Notes are being offered and sold only (i) in the United States to “qualified institutional buyers” (“QIBs”) as defined in, and in accordance with, Rule 144A under the U.S. Securities Act and (ii) outside the United States to persons who are non-U.S. persons (“U.S. Persons”) as defined in, and in accordance with, Regulation S (“Regulation S”) under the U.S. Securities Act. You are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act provided by Rule 144A. See “Notice to Investors” and “Plan of Distribution” for additional information about eligible offerees and transfer restrictions.
Notes Issue Price: 100.0% plus accrued interest from the Issue Date
We expect to deliver the Notes to purchasers in registered Book-Entry form through the facilities of Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A. (“Clearstream”) and its indirect participants on or about June 27, 2018. See “Book-Entry delivery and Form.” Joint Lead Bookrunners
BNP Paribas Banca IMI Mediobanca UniCredit Bank
Bookrunners of the Notes
Credit Suisse ING The date of this Offering Memorandum is June 27, 2018
TABLE OF CONTENTS
IMPORTANT INFORMATION ABOUT THIS OFFERING MEMORANDUM ...... ii STABILIZATION ...... iv NOTICE TO INVESTORS ...... iv NOTICE TO INVESTORS IN THE UNITED STATES ...... iv NOTICE TO INVESTORS IN CANADA ...... iv NOTICE TO CERTAIN EUROPEAN INVESTORS ...... v PRESENTATION OF FINANCIAL INFORMATION ...... vii INCORPORATION BY REFERENCE ...... x FORWARD-LOOKING STATEMENTS ...... xi CURRENCY PRESENTATION AND DEFINITIONS ...... xiii EXCHANGE RATE INFORMATION ...... xvii INDUSTRY AND MARKET DATA ...... xviii SUMMARY ...... 1 CORPORATE STRUCTURE AND CERTAIN FINANCING ARRANGEMENTS ...... 8 THE OFFERING ...... 10 SUMMARY HISTORICAL FINANCIAL INFORMATION AND OTHER DATA ...... 15 RISK FACTORS ...... 21 USE OF PROCEEDS ...... 36 CAPITALIZATION ...... 37 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...... 38 DESCRIPTION OF OTHER INDEBTEDNESS ...... 39 DESCRIPTION OF THE NOTES ...... 52 BOOK-ENTRY DELIVERY AND FORM ...... 85 TAX CONSIDERATIONS ...... 89 PLAN OF DISTRIBUTION ...... 96 WHERE YOU CAN FIND ADDITIONAL INFORMATION ...... 103 ENFORCEMENT OF CIVIL LIABILITIES ...... 104 CERTAIN INSOLVENCY LAW CONSIDERATIONS AND CERTAIN ITALIAN LAW CONSIDERATIONS IN RELATION TO GUARANTEES AND SECURITY INTERESTS ...... 106 LISTING AND GENERAL INFORMATION ...... 134 LEGAL MATTERS ...... 138 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ...... 139
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IMPORTANT INFORMATION ABOUT THIS OFFERING MEMORANDUM This document, including the 2017 Annual Report on Form 20-F (as defined below) and the Report on Form 6-K (as defined below) is referred to herein as this Offering Memorandum. We have prepared this Offering Memorandum solely for use in connection with the Offering. This Offering Memorandum is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire securities. You are authorized to use this Offering Memorandum solely for the purpose of considering the purchase of the Notes. We have incorporated by reference herein our annual report on Form 20-F for the year ended December 31, 2017 filed with the SEC on March 15, 2018 (the “2017 Annual Report on Form 20-F”), which contains our audited consolidated financial statements for the years ended December 31, 2017, 2016 and 2015 included in the F-pages of the 2017 Annual Report on Form 20-F (the “Annual Financial Statements”). Accordingly, we disclose important information to you for purposes of this Offering Memorandum by referring you to the 2017 Annual Report on Form 20-F. See “Incorporation by Reference”. We have also incorporated by reference herein our third report on Form 6-K furnished to the SEC with a filing date of May 21, 2018 and Commission File Number of 001-36906 (the “Report on Form 6-K”), which contains our unaudited interim condensed consolidated financial statements as of and for the three-month periods ended March 31, 2018 and 2017 (the “Interim Financial Statements”). Accordingly, we disclose important information to you for purposes of this Offering Memorandum by referring you to the Interim Financial Statements. See “Incorporation by Reference”. The 2017 Annual Report on Form 20-F and the Report on Form 6-K are considered integral parts of this Offering Memorandum. To the extent any statement contained in this Offering Memorandum or the Report on Form 6-K modifies or updates any statement in the 2017 Annual Report on Form 20-F, the statement in this Offering Memorandum or the Report on Form 6-K prevails, as the case may be. The modifying or updating statement need not state that it has modified or updated a prior statement in the 2017 Annual Report on Form 20-F or include any other information set forth in the document that it modifies or updates. The making of a modifying or updating statement shall not be deemed an admission for any purposes that the modified or updated statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or updated shall not be deemed, except as so modified or updated, to constitute a part of this Offering Memorandum. None of BNP Paribas, Banca IMI S.p.A., Credit Suisse Securities (Europe) Limited, ING Bank N.V., London Branch, Mediobanca — Banca di Credito Finanziario S.p.A. and UniCredit Bank AG, the initial purchasers of the Notes (collectively, the “Initial Purchasers”), the Trustee, the Security Agent and the other agents named herein make any representation or warranty, express or implied, as to the accuracy or completeness of the information set forth in this Offering Memorandum and nothing contained in this Offering Memorandum is or should be relied upon as a promise or representation by any of them as to the past or the future. We accept responsibility for the information contained in this Offering Memorandum (including the documents incorporated by reference herein). We have made all reasonable inquiries and confirm to the best of our knowledge, information and belief that the information contained in this Offering Memorandum with regard to us and our applicable subsidiaries and affiliates, and the Notes, is true and accurate in all material respects, that the opinions and intentions expressed in this Offering Memorandum are honestly held and that we are not aware of any other facts, the omission of which would make this Offering Memorandum or any statement contained herein misleading in any material respect. However, the information set forth in this Offering Memorandum, including under the headings “Exchange Rate Information,” “Summary,” and “Industry and Market Data,” includes extracts from information and data, including industry and market data, released by publicly available sources. The third-party information included in this Offering Memorandum has been accurately reproduced and, to the best of our knowledge, no facts have been omitted which would render the reproduced information inaccurate or misleading. While we accept responsibility for the accurate extraction and summarization of such information and data, we have not independently verified the accuracy of such information and data and we accept no further responsibility in respect thereof. The information set out in relation to sections of this Offering Memorandum describing clearing and settlement arrangements, including the section entitled “Book-Entry, Delivery and Form,” is subject to change
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in or reinterpretation of the rules, regulations and procedures of Euroclear or Clearstream currently in effect. While we accept responsibility for accurately summarizing the information concerning Euroclear and Clearstream, we accept no further responsibility in respect of such information. In addition, this Offering Memorandum contains summaries believed to be accurate with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference. Copies of documents referred to herein will be made available to prospective investors upon request to us or the Initial Purchasers. The information in this Offering Memorandum is current only as of the date on its cover, and may change after that date. For any time after the cover date of this Offering Memorandum, we and each Guarantor do not represent that its affairs are the same as described or that the information in this Offering Memorandum is correct, nor do we or any Guarantor imply those things by delivering the Offering Memorandum or selling Notes to you. References to any website contained herein do not form a part of this Offering Memorandum. By receiving this Offering Memorandum, you acknowledge that you have had an opportunity to request from us for review, and that you have received, all additional information you deem necessary to verify the accuracy and completeness of the information contained in this Offering Memorandum. You also acknowledge that you have not relied on the Initial Purchasers in connection with your investigation of the accuracy of this information or your decision whether to invest in the Notes. We reserve the right to withdraw the Offering at any time. We and the Initial Purchasers reserve the right to reject all or a part of any offer to purchase the Notes, for any reason. We and the Initial Purchasers also reserve the right to sell less than all of the Notes offered by this Offering Memorandum or to sell to any purchaser less than the amount of the Notes it has offered to purchase. You should consult your own legal, tax and business advisors regarding an investment in the Notes. Information in this Offering Memorandum is not legal, tax or business advice. You may not use any information herein for any purpose other than considering an investment in the Notes. This Offering Memorandum is not an offer to sell any Notes and it is not soliciting an offer to buy any Notes in any jurisdiction in which such offer or sale is not permitted. The distribution of this Offering Memorandum and the offer and sale of the Notes may, in certain jurisdictions, be restricted by law. None of us, the Guarantors or the Initial Purchasers represents that this Offering Memorandum may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. None of us, the Guarantors or the Initial Purchasers shall have any responsibility for any of the foregoing legal requirements. In particular, no action has been taken by us or the Initial Purchasers which would permit a public offering of any Notes or distribution of this Offering Memorandum in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Memorandum nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with all applicable laws and regulations. Each purchaser of the Notes must comply with all applicable laws and regulations in force in each jurisdiction in which it purchases, offers or sells the Notes or possesses or distributes this Offering Memorandum, and must obtain any consent, approval or permission required for the purchase, offer or sale by it of the Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes purchases, offers or sales. Persons into whose possession this Offering Memorandum or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of the Offering Memorandum and the offering and sale of Notes. In particular, there are restrictions on the offer and sale of the Notes, and the circulation of documents relating thereto, in certain jurisdictions including the United States and the United Kingdom and to persons connected therewith. See “Notice to Investors.” We do not make any representation to you that the Notes are a legal investment for you. If you are in any doubt about the contents of this Offering Memorandum, you should consult your stockbroker, bank manager, solicitor, accountant or other financial advisor. It should be remembered that the price of the Notes and the income from them can go down as well as up.
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None of the SEC, any state securities commission, any state gaming commission or any other gaming authority or other regulatory agency (including, without limitation, the Nevada Gaming Commission and the Nevada State Gaming Control Board) has approved or disapproved of the Notes or determined if this Offering Memorandum is truthful or complete. Any representation to the contrary is unlawful in the United States. We have applied to have the Notes listed on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market of Euronext Dublin. In the course of any review by the competent listing authority, we may be requested to make changes to the financial and other information included in this Offering Memorandum (including the documents incorporated by reference herein). We may also be required to update the information in this Offering Memorandum to reflect changes in our business, prospects, financial condition or results of operations. STABILIZATION IN CONNECTION WITH THIS OFFERING, BNP PARIBAS (OR PERSONS ACTING ON BEHALF OF BNP PARIBAS) (THE “STABILIZING MANAGER”) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES, IN EACH CASE AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, STABILIZATION WITH RESPECT TO THE NOTES MAY NOT NECESSARILY OCCUR. ANY STABILIZATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE FINAL TERMS OF THE OFFERING IS MADE AND, IF BEGUN, MAY CEASE AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE DATE ON WHICH WE RECEIVED THE PROCEEDS OF THE OFFERING AND SALE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. NOTICE TO INVESTORS We and the Guarantors accept responsibility for the information contained in this Offering Memorandum. To the best of our knowledge and the best knowledge of the Guarantors (each having taken all reasonable care to ensure that such is the case), the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. This Offering Memorandum is to be read in conjunction with the 2017 Annual Report on Form 20-F (as defined herein) and the Report on Form 6-K (as defined herein) (see “Important Information about this Offering Memorandum” above and “Incorporation by Reference” below) and such documents are incorporated by reference in, and form part of, this Offering Memorandum. NOTICE TO INVESTORS IN THE UNITED STATES The Offering is being made in the United States in reliance upon an exemption from registration under the U.S. Securities Act for an offer and sale of the Notes which does not involve a public offering. In making your purchase, you will be deemed to have made certain acknowledgments, representations and agreements that are described in this Offering Memorandum. This Offering Memorandum is being provided (1) to a limited number of United States investors that we reasonably believe to be QIBs for use solely in connection with their consideration of the purchase of the Notes and (2) to non-U.S. Persons outside the United States in offshore transactions in compliance with Regulation S. Prospective investors are hereby notified that sellers of the Notes may be relying on the exemption from the registration requirements of Section 5 of the U.S. Securities Act provided by Rule 144A. The Notes described in this Offering Memorandum have not been registered with, recommended by or approved by the SEC, any state securities commission in the United States or any other securities commission or regulatory authority, nor has the SEC, any state securities commission in the United States or any such securities commission or authority passed upon the accuracy or adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offense. See “Notice to Investors.” NOTICE TO INVESTORS IN CANADA The Notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1)
(iv)
of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this Offering Memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the Initial Purchasers are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with the Offering. NOTICE TO CERTAIN EUROPEAN INVESTORS European Economic Area. This Offering Memorandum has been prepared on the basis that all offers of the Notes will be made pursuant to an exemption under Article 3 of Directive 2003/71/EC (the “Prospectus Directive”), as implemented in member states of the European Economic Area (the “EEA”), from the requirement to produce a prospectus for offers of the Notes. Accordingly, any person making or intending to make an offer in that EEA of Notes should only do so in circumstances in which no obligation arises for the Issuer or any of the Initial Purchasers to produce or publish a prospectus pursuant to Article 3 of the Prospectus Directive, in each case, in relation to such offer. Neither the Issuer nor the Initial Purchasers has authorized, nor do they authorize, the making of any offer of Notes through any financial intermediary, other than offers made by the Initial Purchasers, which constitute the final placement of the Notes contemplated in this Offering Memorandum. IMPORTANT—EEA RETAIL INVESTORS—Prohibition of Sales to EEA Retail Investors The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU as amended (“MiFID II”); (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the “Insurance Mediation Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Directive. No key information document required by Regulation (EU) No. 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared. Offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation. MIFID II product governance / Professional Investors and ECPs Only Target Market Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion in relation to the type of clients criteria only that: (i) the type of clients to whom the Notes are targeted is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturers’ type of clients assessment) and determining appropriate distribution channels. United Kingdom. This Offering Memorandum is for distribution only to, and is only directed at, persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, (the “Financial Promotion Order”), (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations, etc.”) of the Financial Promotion Order, (iii) are outside the United Kingdom or (iv) are persons
(v)
to whom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA) in connection with the offering or sale of any Notes may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This Offering Memorandum is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Offering Memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. Italy. The Offering has not been cleared by the Commissione Nazionale per la Società e la Borsa (“CONSOB”) (the Italian securities exchange commission) pursuant to Italian securities legislation and will not be subject to formal review by CONSOB. Accordingly, no Notes may be offered, sold or delivered, directly or indirectly nor may copies of this Offering Memorandum or of any other document relating to the Notes be distributed in the Republic of Italy, except (a) to qualified investors (investitori qualificati) as defined in Article 35, first paragraph, letter (d) of CONSOB Regulation No. 20307 of February 15, 2018, as amended (“Regulation 20307”), pursuant to Article 34-ter, first paragraph letter (b) of CONSOB Regulation No. 11971 of May 14, 1999, as amended (“Regulation 11971”), implementing Article 100 of Legislative Decree No. 58 of February 24, 1998, as amended (the “Italian Financial Act”); and (b) in any other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Italian Financial Act and the implemented CONSOB regulations, including Regulation 11971. For the purposes of this provision, the expression “offer of Notes to the public” in Italy means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, including the placement through authorized intermediaries. Any such offer, sale or delivery of the Notes or distribution of copies of this Offering Memorandum or any other document relating to the Notes in the Republic of Italy must be in compliance with the selling restrictions under (a) and (b) above and must be: (i) made by soggetti abilitati (including investment firms, banks or financial intermediaries, as defined by Article 1, first paragraph, letter r), of the Italian Financial Act), to the extent duly authorized to engage in the placement or underwriting or purchase of financial instruments in the Republic of Italy in accordance with the relevant provisions of the Italian Financial Act, Regulation 20307, as amended, Italian Legislative Decree No. 385 of September 1, 1993, as amended (the “Italian Banking Act”), Regulation 11971 and any other applicable laws and regulations; (ii) in compliance with all relevant Italian securities, tax, exchange control and any other applicable laws and regulations and any other applicable requirement or limitation that may be imposed from time to time by CONSOB, the Bank of Italy (including, the reporting requirements, where applicable, pursuant to Article 129 of the Italian Banking Act and the implementing guidelines of the Bank of Italy, as amended from time to time) or any other relevant Italian competent authorities; and (iii) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or the Bank of Italy or any other Italian authority. Any investor purchasing the Notes is solely responsible for ensuring that any offer, sale, delivery or resale of the Notes by such investor occurs in compliance with applicable Italian laws and regulations. THIS OFFERING MEMORANDUM CONTAINS IMPORTANT INFORMATION WHICH YOU SHOULD READ BEFORE YOU MAKE ANY DECISION WITH RESPECT TO AN INVESTMENT IN THE NOTES.
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PRESENTATION OF FINANCIAL INFORMATION Our financial information included in this Offering Memorandum is presented in U.S. dollars and our financial statements are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Our financial information included in this Offering Memorandum has been derived from our audited consolidated financial statements for the years ended December 31, 2017, 2016, and 2015 (the “Annual Financial Statements”), included in the F-pages of the 2017 Annual Report on Form 20-F, and our unaudited interim condensed consolidated financial statements as of and for the three-month periods ended March 31, 2018 and 2017 (the “Interim Financial Statements”). The Annual Financial Statements were audited by PricewaterhouseCoopers LLP (“PwC US”). The Interim Financial Statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, the Interim Financial Statements do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements, but reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the interim period results. The Interim Financial Statements should be read in conjunction with the Annual Financial Statements. Impact of the Adoption of New Accounting Standards In the first quarter of 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) on a modified retrospective basis. We recognized the cumulative effect of initially applying ASC 606 as an adjustment to beginning retained deficit on January 1, 2018. As a result of adopting ASC 606 using the modified retrospective application approach, prior periods were not adjusted and, as such, are not comparable. The condensed consolidated statement of cash flows for the three months ended March 31, 2017 have been adjusted following the retrospective adoption in the first quarter of 2018 of Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents have been included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the condensed consolidated statement of cash flows. The consolidated statements of cash flows set forth in 2017 Annual Report on Form 20-F have not been adjusted to reflect the adoption of ASU 2016-18. In connection with the adoption of ASU 2016-18, the Company corrected its balance sheet as of December 31, 2015 to include additional amounts of current restricted cash and cash equivalents of $48.6 million which had previously been offset against current liabilities of the same amounts. Accordingly, the revised total amount of restricted cash and cash equivalents as of December 31, 2015 is $169.1 million which resulted in a corresponding adjustment to operating activities of $25.6 million, which is reflected in the ASU 2016-18 adjustments for the year ended December 31, 2015. Restatements We have restated the consolidated statement of cash flows for the year ended December 31, 2016 to correct the misclassification of the upfront payment of $665.3 million made in two installments in 2016 to the Italian governmental authority in connection with the Italian Gioco del Lotto service concession (the “Upfront Payment”) from investing activities to operating activities. We concluded that license fee payments made to a customer and amortized as a reduction of service revenue should be classified as a cash outflow from operating activities in accordance with Accounting Standards Codification 230, Statement of Cash Flows. In addition to this correction, the consolidated statement of cash flows for the year ended December 31, 2016 has been corrected to reflect other immaterial misclassifications. We have revised the consolidated statement of cash flows for the year ended December 31, 2015 to correct the classification of other upfront payments made of a similar nature as the Upfront Payment as well as other immaterial misclassifications. See also “Risk Factors—Risks Relating to Internal Controls and Disclosure Controls and Procedures—In connection with the restatement of our consolidated statement of cash flows for the year ended December 31, 2016, we identified a material weakness in our internal control over financial reporting.”
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Financial Information for the Trailing Twelve Months Ended March 31, 2018 Our unaudited financial information for the trailing twelve months ended March 31, 2018 has been derived by adding our unaudited financial information for the three months ended March 31, 2018 to the difference between our audited financial information for the year ended December 31, 2017 and our unaudited financial information for the three months ended March 31, 2017. Our unaudited financial information for the trailing twelve months ended March 31, 2018 has been prepared for illustrative purposes only, is not prepared in the ordinary course of our financial reporting, is not necessarily indicative of the results that may be expected for the year ended December 31, 2018 and should not be used as the basis for a prediction of an annualized calculation. Our financial information for the three months ended March 31, 2018 reflects the adoption of new accounting standards, such as ASC 606, and therefore are not prepared on a basis that is fully comparable to the three months ended March 31, 2017 or the year ended December 31, 2017. Summary Pro Forma Financial Information In this Offering Memorandum, we also present certain financial information on an adjusted basis, to give effect to the Transactions (as defined herein), as if the Transactions had occurred on March 31, 2018. See “Summary Historical Financial Information and Other Data—Summary Pro Forma Financial Information” for a description of the pro forma effect of the Transactions, including the offering and sale of the Notes and the use of the proceeds thereof. See “Use of Proceeds.” The summary pro forma financial information set forth in this Offering Memorandum has not been prepared in accordance with the requirements of Regulation S-X under the U.S. Securities Exchange Act of 1934, the Prospectus Directive or any generally accepted accounting standard, including U.S. GAAP. Neither the adjustments nor the resulting pro forma financial information have been audited or reviewed in accordance with U.S. GAAP or any other auditing standards. Non-U.S. GAAP Financial Measures In this Offering Memorandum, certain non-U.S. GAAP measures, including Adjusted EBITDA, Adjusted EBITDA Margin, Free Operating Cash Flows and Net Debt are presented. “Adjusted EBITDA” is defined as net income (loss) before provision for (benefit from) income taxes, non-operating expenses, depreciation, amortization, service revenue amortization, stock-based compensation expense, restructuring expense, transaction (income) expense, net, non-cash purchase accounting (excluding depreciation and amortization), impairment loss and bad debt expense (recovery), net. “Adjusted EBITDA Margin” is defined as Adjusted EBITDA divided by total revenue. “Free Operating Cash Flows” is defined as net operating cash flows less Capital Expenditures. “Net Assets” is defined as total assets less total liabilities and redeemable non-controlling interests. The Net Assets of the Group have been calculated on a consolidated basis and therefore intercompany items (e.g., investments in subsidiaries) have been eliminated. The Net Assets of the Issuer, the Issuer and the Guarantors and the non-Guarantor subsidiaries have been calculated on a standalone basis and therefore intercompany items (e.g., investments in subsidiaries) have not been eliminated. Because virtually all of the non-Guarantor subsidiaries are directly or indirectly a subsidiary of a Guarantor and several of the Guarantors are directly a subsidiary of another Guarantor, the non-elimination of intercompany items substantially increases the percentage of the Net Assets of the Group represented by the Issuer and the Guarantors relative to the percentage of the Net Assets of the Group represented by the non-Guarantor subsidiaries, causing the Net Asset amounts to be less useful for evaluating the scope of guarantor coverage. “Net Debt” is defined as total debt less cash and equivalents. Adjusted EBITDA, Adjusted EBITDA Margin, Free Operating Cash Flows, Net Debt and the other non-U.S. GAAP measures mentioned in this Offering Memorandum are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing Adjusted EBITDA, Adjusted EBITDA Margin, Free Operating Cash Flows, Net Debt and the other non-U.S. GAAP measures mentioned in this Offering Memorandum to similar measures used by other companies.
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None of Adjusted EBITDA, Adjusted EBITDA Margin, Free Operating Cash Flows, Net Debt or the other non-U.S. GAAP measures mentioned in this Offering Memorandum is a measurement of performance under U.S. GAAP, and you should not consider Adjusted EBITDA, Adjusted EBITDA Margin, Free Operating Cash Flows, Net Debt or the other non-U.S. GAAP measures mentioned in this Offering Memorandum as an alternative to net income, operating profit, cash flows from operations, investing activities or financing activities or other measures determined in accordance with U.S. GAAP. Adjusted EBITDA, Adjusted EBITDA Margin, Free Operating Cash Flows, Net Debt and the other non-U.S. GAAP measures mentioned in this Offering Memorandum have limitations as analytical tools, and you should not consider them in isolation. Some of these limitations include that:
they do not reflect cash expenditures or future requirements for capital expenditures or contractual commitments;
they do not reflect changes in, or cash requirements for, working capital needs;
they do not reflect the interest expense, or the cash requirements necessary, to service interest or principal payments on debt;
although depreciation and amortization are non-monetary charges, the assets being depreciated and amortized will often need to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements that would be required for such replacements;
some of the items eliminated in calculating Adjusted EBITDA reflect cash payments that were made, or will be made in the future; and
the fact that other companies in the same industry may calculate Adjusted EBITDA and the other non-U.S. GAAP measures mentioned in this Offering Memorandum differently than those mentioned in this Offering Memorandum, which limits their usefulness as comparative measures. Dollar Equivalent Data for the Notes This Offering Memorandum contains certain figures that present the expected gross proceeds of the Notes in the Offering, which will be denominated in euros, in an equivalent amount of U.S. dollars, calculated at an exchange rate of $1.23 per €1.00. See “The Offering”, “Use of Proceeds” and “Capitalization”. Such exchange rate is consistent with the dollar-equivalent presentation of our financial results for the three months ended March 31, 2018 in the Report on Form 6-K; however, such exchange rate may not reflect the prevailing U.S. dollar-euro exchange rate from time to time, including as of the date of this Offering Memorandum or as of the date we receive proceeds from the Offering. See “Exchange Rate Information”. Operational Data This Offering Memorandum contains certain measures of operational data, including wagers for Lotto, instant ticket total sales, wagers for machine gaming, wagers for sports betting, wagers for interactive, VLTs (as defined below) installed, AWPs (as defined below) installed, new/expansion machine units shipped, replacement machine units shipped and our gaming operations installed base. The measures of operational data included in this Offering Memorandum are not measurements of financial performance under U.S. GAAP and should not be considered as alternatives to other indicators of operating performance, cash flows or any other measure of performance derived in accordance with U.S. GAAP. We believe that the presentation of measures of operational data included in this Offering Memorandum may be helpful as indications of operational performance. However, the methodology for determining measures of operational data included in this Offering Memorandum may not be comparable to the methodology used by other companies in determining these measures. Rounding Certain numerical figures contained in this Offering Memorandum, including financial information and certain operating data, have been subject to rounding adjustments. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables may not conform exactly to the total figure given for that column or row, or the sum of certain percentages may not conform exactly to the total percentage given.
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INCORPORATION BY REFERENCE The information contained in this Offering Memorandum should be read in conjunction with the 2017 Annual Report on Form 20-F (which contains the Annual Financial Statements) and the Report on Form 6-K (which contains the Interim Financial Statements), but in each case excluding the exhibits thereto. Each of the foregoing documents incorporated by reference herein can be examined on our website (http://phx.corporate-ir.net/phoenix.zhtml?c=119000&p=irol-sec) as well as on the website of the SEC at http://www.sec.gov. Any other information not listed above, but contained in the documents incorporated by reference herein, is made available for information purposes only. Each document incorporated by reference herein is current only as of the date of such document, and the incorporation by reference herein of such documents shall not create any implication that there has been no change in our affairs since the date thereof or that the information contained therein is current as of any time subsequent to its date. To the extent any statement in a document incorporated by reference herein conflicts with a statement in this Offering Memorandum, such conflicting information contained in such document incorporated by reference herein is superseded by the information contained in this Offering Memorandum. Any statement contained in this Offering Memorandum or in a document that is incorporated by reference herein shall be deemed modified or superseded to the extent a statement contained in any subsequent document that is also incorporated by reference herein modifies or supersedes any such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offering Memorandum. References to this Offering Memorandum shall be taken to mean this document (as it may be supplemented from time to time) and the documents incorporated by reference herein.
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FORWARD-LOOKING STATEMENTS This Offering Memorandum (including the documents incorporated by reference herein) includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of the securities laws of certain applicable jurisdictions. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this Offering Memorandum, including, without limitation, those regarding us, our future financial position and results of operations, our strategies, plans, objectives, goals and targets, future developments in the markets in which we participate or seek to participate or anticipated regulatory changes in the markets in which we operate or intend to operate. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “plan,” “potential,” “predict,” “projected,” “should,” “suggest,” “target,” “will” or “would” and other similar expressions or, in each case, the negative of such terms or other comparable terminology. They appear in a number of places throughout this Offering Memorandum and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. By their nature, forward-looking statements involve known and unknown risks, significant uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and are based on numerous assumptions (which may prove inaccurate) and that actual results of operations, including financial condition and liquidity and the development of the industries in which we operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this Offering Memorandum. In addition, even if results of operations, including financial condition and liquidity and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Offering Memorandum, those results or developments may not be indicative of results or developments in subsequent periods. Important risks, uncertainties and other factors that could cause these differences include, but are not limited to:
the possibility that we will be unable to pay future dividends to shareholders or that the amount of such dividends may be less than anticipated;
reductions in customer spending;
a slowdown in customer payments and changes in customer demand for products and services as a result of changing economic conditions or otherwise;
unanticipated changes relating to competitive factors in the industries in which we operate;
our ability to hire and retain key personnel;
our ability to attract new customers and retain existing customers in the manner anticipated;
reliance on and integration of information technology systems;
changes in legislation or governmental regulations affecting us;
international, national, or local economic, social or political conditions that could adversely affect us or our customers;
conditions in the credit markets;
risks associated with assumptions we make in connection with its critical accounting estimates;
the resolution of pending and potential future legal, regulatory or tax proceedings and investigations; and
our international operations, which are subject to the risks of currency fluctuations and foreign exchange controls.
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The list above is not exhaustive and there are other factors that may cause actual results to differ materially from the forward-looking statements contained in this Offering Memorandum. Moreover, new risk factors emerge from time to time and it is not possible to predict all such risk factors. It is difficult to assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. You are urged to read the sections of this Offering Memorandum entitled “Risk Factors” and “Item 3.D. Risk Factors” of the 2017 Annual Report on Form 20-F for a more complete discussion of the factors that could affect future performance and the markets in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Offering Memorandum may not occur. These forward-looking statements speak only at the date on which the statements were made. We undertake no obligation to update or revise any forward-looking statement or risk factors, whether as a result of new information, future events or developments or otherwise.
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CURRENCY PRESENTATION AND DEFINITIONS In this Offering Memorandum, all references to “U.S. dollars” and “$” are to the lawful currency of the United States of America; all references to “euro” or “€” are to the single currency of the participating member states of the European and Monetary Union of the Treaty Establishing the European Community, as amended from time to time; all references to “pounds sterling” or “£” are to British pound sterling, the lawful currency of the United Kingdom. Definitions As used in this Offering Memorandum:
“2017 Annual Report on 20-F” refers to our annual report on Form 20-F for the years ended December 31, 2017, 2016 and 2015, which was filed with the SEC on March 15, 2018;
“2019 Notes” refers to the $500,000,000 7.500% Senior Secured Notes due June 15, 2019 issued by IGT US HoldCo (of which $144,303,000 in principal was outstanding as of March 31, 2018);
“2020 5.625% Notes” refers to the $600,000,000 5.625% Senior Secured Notes due February 15, 2020 issued by the Issuer;
“2020 4.125% Notes” refers to the €700,000,000 4.125% Senior Secured Notes due February 15, 2020 issued by the Issuer;
“2020 4.750% Notes” refers to the €500,000,000 4.750% Senior Secured Notes due March 5, 2020 issued by the Issuer with an initial coupon of 3.500%;
“2020 5.500% Notes” refers to the $300,000,000 5.500% Senior Secured Notes due June 15, 2020 issued by IGT US HoldCo (of which $124,143,000 in principal was outstanding as of March 31, 2018);
“2022 Notes” refers to the $1,500,000,000 6.250% Senior Secured Notes due February 15, 2022 issued by the Issuer;
“2023 4.750% Notes” refers to the €850,000,000 4.750% Senior Secured Notes due February 15, 2023 issued by the Issuer;
“2023 5.350% Notes” refers to the $500,000,000 5.350% Senior Secured Notes due October 15, 2023 issued by IGT US HoldCo (of which $60,567,000 in principal was outstanding as of March 31, 2018);
“2025 Notes” refers to the $1,100,000,000 6.500% Senior Secured Notes due February 15, 2025 issued by the Issuer;
“ADM” refers to Agenzia delle Dogane e dei Monopoli, the governmental authority responsible for regulating and supervising gaming in Italy;
“Annual Financial Statements” refers to our audited consolidated financial statements for the years ended December 31, 2017, 2016 and 2015 included in the F-pages of the 2017 Annual Report on Form 20-F;
“AWP” refers to an amusement with prize machine;
“Class II” refers to machines connected to a central server that determines the game outcome, encompassing VLTs used primarily in government-sponsored applications and electronic or video bingo machines (classified as such in tribal jurisdictions);
“Clearstream” refers to Clearstream Banking S.A., an International Central Securities Depository and clearer of bonds for the European market;
“Collateral” refers to the Notes Collateral and the Guarantee Collateral;
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“Double Down Sale” refers to the sale of Double Down Interactive LLC on June 1, 2017 for gross cash proceeds of $825.6 million;
“EU” refers to the European Union;
“EURIBOR” refers to the Euro Interbank Offered Rate;
“Euroclear” refers to Euroclear Bank SA/NV, an International Central Securities Depository and clearer of bonds for the European market;
“Euronext Dublin” refers to the Irish Stock Exchange Plc, trading as Euronext Dublin;
“Existing IGT US HoldCo Indentures” refers, collectively, to the indentures governing the Existing IGT US HoldCo Notes;
“Existing Indentures” refers, collectively, to the trust deed governing the 2020 4.750% Notes and the indenture governing the Existing Notes Issued in 2015;
“Existing IGT US HoldCo Notes” refers, collectively, to the 2019 Notes, the 2020 5.500% Notes and the 2023 5.350% Notes;
“Existing Notes” refers, collectively, to the 2020 4.750% Notes and the Existing Notes Issued in 2015;
“Existing Notes Issued in 2015” refers, collectively, to the 2020 5.625% Notes, the 2020 4.125% Notes, the 2022 Notes, the 2023 4.750% Notes and the 2025 Notes;
“Existing IGT US HoldCo Notes Trustee” refers to Wells Fargo Bank, National Association;
“Existing Notes Trustee” refers to BNY Mellon Corporate Trustee Services Limited;
“Expiration Time” refers to the time at which the Tender Offer will expire (4:00 PM, London time, on June 25, 2018);
“Group” refers to us and our consolidated subsidiaries;
“Guarantee Collateral” refers to the Guarantee Collateral as defined under “Description of the Notes;”
“IGT US HoldCo” refers to International Game Technology, a Nevada corporation and a wholly-owned subsidiary of the Issuer;
“IGT US OpCo” refers to IGT, a Nevada corporation and a wholly-owned subsidiary of IGT US HoldCo;
“Indenture” refers to the indenture governing the Notes;
“Intercreditor Agreement” refers to the Intercreditor Agreement dated April 7, 2015 among the Issuer as Parent; NatWest Markets Plc (formerly known as The Royal Bank of Scotland plc) as Common Security Agent; NatWest Markets Plc (formerly known as The Royal Bank of Scotland plc) as Revolving Agent; the financial institutions named on the signature pages thereof as Revolving Lenders; the financial institutions named on the signature pages thereof as Revolving Swingline Lenders; NatWest Markets Plc (formerly known as The Royal Bank of Scotland plc) as Issuing Agent; KeyBank National Association as Swingline Agent; the financial institutions named on the signature pages thereof as Revolving Arrangers; Mediobanca — Banca di Credito Finanziario S.p.A. as Term Agent; the financial institutions named on the signature pages thereof as Term Lenders; the financial institutions named on the signature pages thereof as Term Arrangers; BNY Mellon Corporate Trustee Services Limited as 2018 GTECH Notes Senior Secured Notes Trustee; BNY Mellon Corporate Trustee Services Limited as 2020 GTECH Notes Senior Secured Notes Trustee; Wells Fargo Bank, National Association as IGT Senior Secured Notes Trustee; BNY Mellon Corporate Trustee Services Limited as the New Senior Secured Notes Trustee; the companies named
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on the signature pages thereof as Intra-Group Lenders; and the subsidiaries of the Issuer named on the signature pages thereof as Original Debtors, as amended, restated, modified, renewed or replaced in whole or in part from time to time, which is described in more detail in “Description of Other Indebtedness—Intercreditor Agreement;”
“Interim Financial Statements” refers to our unaudited interim condensed consolidated financial statements as of and for the three-month periods ended March 31, 2018 and 2017 which are contained in the Report on Form 6-K;
“Irish Listing Agent” refers to The Bank of New York Mellon SA/NV, Dublin Branch;
“Issuer” or the pronouns “we,” “us,” or “our” as the context or clarity requires, refer to International Game Technology PLC, a public limited company incorporated under the laws of England and Wales;
“Italian Civil Code” refers to the Italian civil code (codice civile), enacted by Royal Decree No. 22 of March 16, 1942, as subsequently amended and supplemented;
“Italian Guarantor” refers to Lottomatica Holding S.r.l., a società a responsabilità limitata organized under the laws of Italy;
“LIBOR” refers to the London Interbank Offered Rate;
“Notes” refers to the €500.0 million aggregate principal amount of 3.500% Senior Secured Notes due 2024 offered by the Issuer hereby.
“Notes Collateral” refers to the Notes Collateral as defined under “Description of the Notes;”
“OFAC” refers to the Office of Foreign Assets Control of the United States Department of Treasury;
“Offering” refers to the offering of the Notes described in this Offering Memorandum;
“OID” refers to original issue discount;
“Paying Agent” refers to The Bank of New York Mellon, London Branch;
“Registrar” refers to The Bank of New York Mellon SA/NV, Luxembourg Branch;
“Report on Form 6-K” refers to our third report on Form 6-K furnished to the SEC with a filing date of May 21, 2018 and Commission File Number of 001-36906;
“Revolving Credit Facilities” refers to the $1,200,000,000 and €725,000,000 multicurrency revolving credit facilities available to the Issuer and certain of its subsidiaries under the Revolving Credit Facilities Agreement;
“Revolving Credit Facilities Agreement” refers to the senior facilities agreement dated November 4, 2014 for the $1,200,000,000 and €725,000,000 multicurrency revolving credit facilities among the Issuer, as the Parent and a Borrower; IGT Global Solutions Corporation, as a Borrower; J.P Morgan Limited and Mediobanca — Banca di Credito Finanziario S.p.A., as the Global Coordinators, Bookrunners and Mandated Lead Arrangers; the entities listed in Part III of Schedule 1 thereto, as the Bookrunners and Mandated Lead Arrangers; the entities listed in Part IV of Schedule 1 thereto, as the Mandated Lead Arrangers; the entities listed in Part V of Schedule 1 thereto, as the Arrangers; the financial institutions listed in Part II of Schedule 1 thereto, as the Original Lenders; NatWest Markets Plc, as the Agent; NatWest Markets Plc, as the Issuing Agent; and the other parties thereto, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time;
“SEC” refers to the United States Securities and Exchange Commission;
“Security Agent” refers to NatWest Markets Plc;
“Security Documents” refers to the Security Documents as defined under “Description of the Notes;”
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“Target Notes” refers to the 2020 4.125% Notes and the 2020 4.750% Notes purchased pursuant to the Tender Offer;
“Tender Offer” refers to the Issuer’s offer to purchase for cash an aggregate €500.0 million principal amount of the Target Notes less the premium payable thereon;
“Term Loan Facility” refers to the €1,500,000,000 senior term loan facility made available under the Term Loan Facility Agreement;
“Term Loan Facility Agreement” refers to the senior facility agreement dated July 25, 2017 for the €1,500,000,000 senior term loan facility among the Issuer, as the Borrower; certain Subsidiaries of the Issuer listed in Part I of Schedule 1 thereto, as the Original Guarantors; Bank of America Merrill Lynch International Limited and Mediobanca — Banca di Credito Finanziario S.p.A., as the Global Coordinators, Bookrunners and Mandated Lead Arrangers; the entities listed in Part III of Schedule 1 thereto as the Bookrunners and Mandated Lead Arrangers; the entities listed in Part IV of Schedule 1 thereto as the Mandated Lead Arrangers; the financial institutions listed in Part II of Schedule 1, as the Original Lenders; and Mediobanca — Banca di Credito Finanziario S.p.A., as the Agent, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time;
“Transactions” refers to the Offering and the Tender Offer;
“Transfer Agent” refers to The Bank of New York Mellon, London Branch;
“Trustee” refers to BNY Mellon Corporate Trustee Services Limited in its capacity as trustee under the Indenture;
“U.K. Companies Act” refers to the United Kingdom Companies Act 2006, as amended;
“U.S. Exchange Act” refers to the United States Securities Exchange Act of 1934, as amended;
“U.S. Securities Act” refers to the United States Securities Act of 1933, as amended;
“VAT” refers to value added tax; and
“VLT” refers to a video lottery terminal.
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EXCHANGE RATE INFORMATION The following table sets forth, for the periods set forth below, the high, low, average and period end Bloomberg Composite Rate exchange rate information. The Bloomberg Composite Rate is a “best market” calculation, in which, at any point in time, the bid exchange rate is equal to the highest bid exchange rate of all contributing bank indications and the ask exchange rate is set to the lowest ask exchange rate offered by these banks. The Bloomberg Composite Rate is a mid-value exchange rate between the applied highest bid exchange rate and the lowest ask exchange rate. The exchange rates may differ from the actual exchange rates used in the preparation of the consolidated financial statements and other financial information appearing in this Offering Memorandum. None of us, the Guarantors or the Initial Purchasers represent that the euro amounts referred to below could be or could have been converted into U.S. dollars at any particular exchange rate indicated or any other exchange rate. The average exchange rate for a year means the average of the Bloomberg Composite Rates on the last day of each month during a year. The average exchange rate for a month or for any shorter period, means the average of the daily Bloomberg Composite Rate during that month, or shorter period, as the case may be. The Bloomberg Composite Rate of U.S. dollars to euro on June 15, 2018 was $1.1609 per €1.00.
Period Average(1)(2) High Low Period End(3) ($ per euro) Year 2014 ...... 1.3291 1.3953 1.2160 1.2160 2015 ...... 1.1100 1.2141 1.0552 1.0926 2016 ...... 1.1068 1.1569 1.0364 1.0541 2017 ...... 1.1287 1.2041 1.0416 1.1839 Month January 2018 ...... 1.2201 1.2427 1.1937 1.2414 February 2018 ...... 1.2344 1.2509 1.2194 1.2194 March 2018 ...... 1.2366 1.2444 1.2241 1.2324 April 2018 ...... 1.2273 1.2379 1.2077 1.2077 May 2018 ...... 1.1813 1.1993 1.1540 1.1693 June 2018 (through June 15, 2018) ...... 1.1720 1.1799 1.1568 1.1609 ______(1) The average exchange rate for a year means the average of the Bloomberg Composite Rate on the last day of each month during a year. (2) The average exchange rate for each month presented is based on the average Bloomberg Composite Rate for each business day of such month. (3) Represents the exchange rate on the last business day of the applicable period.
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INDUSTRY AND MARKET DATA In this Offering Memorandum (including the documents incorporated by reference herein), we rely on and refer to information regarding the businesses and markets in which we operate and compete. The market data and certain economic and industry data and forecasts used in this Offering Memorandum were obtained from governmental and other publicly available information, independent industry publications and reports prepared by trade associations and industry consultants such as ADM, Eilers-Fantini and Global Betting and Gaming Consultants March 2018 global gaming forecasts. The third-party information included in this Offering Memorandum has been accurately reproduced and, to the best of our knowledge, no facts have been omitted which would render the reproduced information inaccurate or misleading. In addition to the foregoing, certain information and data regarding markets, market size, market share, market position, growth rates and other industry data pertaining to us contained in this Offering Memorandum were estimated or derived based on assumptions and from internal research, surveys or studies conducted by third parties, including trade and business organizations and associations, and other industry or general publications. Market data and statistics are inherently uncertain and not necessarily reflective of actual market conditions. Such statistics are based on market research, which itself is based on sampling and subjective judgments by both the researchers and the respondents, including judgments about what types of products and transactions should be included in the relevant market. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that there can be no assurance as to the accuracy and completeness of such information that these industry publications, surveys and forecasts are reliable, but neither we nor the Initial Purchasers have independently verified any of the data from third party sources. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this Offering Memorandum. In many cases, there is no readily available external information (whether from trade and business organizations and associations, government bodies or other organizations) to validate market-related analyses and estimates, requiring us to rely on internally developed estimates based on experience regarding the industry, the market share and the market shares of various industry participants, the investigation of market conditions and the review of industry publications, including information made available to the public by competitors. Neither we nor the Initial Purchasers can assure you of the accuracy and completeness of, or take any responsibility for, such data. Similarly, while we believe that the internal estimates are reasonable, such estimates have not been verified by any independent sources, and neither we nor the Initial Purchasers can assure you as to their accuracy or the accuracy of the underlying assumptions used to estimate such data or that a third party using different methods to assemble, analyze or compute market data would obtain the same result. Estimates involve risks and uncertainties and are subject to change based on various factors. For further discussion, see “Item 3.D.Risk Factors” of the 2017 Annual Report on Form 20-F and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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SUMMARY This summary highlights selected information about us and the Offering contained in this Offering Memorandum. This summary is not complete and does not contain all the information that prospective investors should consider before investing in the Notes. The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information included in this Offering Memorandum (including the documents incorporated by reference herein). You should read this Offering Memorandum carefully in its entirety, including the sections entitled “Presentation of Financial Information,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview We are the world’s largest end-to-end gaming company (by revenue), with leading market positions in North America and Italy and the most extensive gaming content library in the world. We operate and provide an integrated portfolio of innovative technology products and services across all gaming markets, including: lottery management services, online and instant lotteries, instant ticket printing, electronic gaming machines, sports betting and interactive gaming. We offer business-to-consumer (“B2C”) and business-to-business (“B2B”) products and services to customers in over 100 countries. Leveraging a wealth of premium content, substantial investment in technology, in-depth customer intelligence and operational expertise, our solutions anticipate the demands of consumers wherever they decide to play, providing customers with leading edge solutions. We had total revenue of $4.993 billion and Adjusted EBITDA of $1.741 billion for the trailing twelve months ended March 31, 2018, and had total revenue of $4.939 billion and Adjusted EBITDA of $1.676 billion for the year ended December 31, 2017. We are headquartered in London, with principal operating facilities located in Providence, Rhode Island; Las Vegas, Nevada; and Rome, Italy. We are organized into four business segments, which are supported by corporate shared services: North America Gaming and Interactive, North America Lottery, International and Italy. Research and development and manufacturing are centralized in North America. We have over 12,000 employees as of December 31, 2017. Our core markets are the United States and Italy and we have further diversified our international business. The charts below set forth the relative percentage of our total revenue by geographic region and by product segment for the year ended December 31, 2017.
Services and Products Lottery. Our lottery services are provided through operating and facilities management contracts and lottery management agreements. We supply a unique set of lottery solutions to more than 100 customers worldwide. In the majority of jurisdictions, lottery authorities award contracts through a competitive bidding process. Typical service contracts are five to 10 years in duration, often with multi-year extension options. After the expiration of the initial or extended contract term, a lottery authority generally may either seek to negotiate further extensions or commence a new competitive bidding process. We design, sell, and operate a complete suite of point-of-sale terminals that are electronically linked with a centralized transaction processing system that reconciles lottery funds between the retailer, where a
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transaction is enabled, and the lottery authority, where the transaction is captured. We provide and operate highly secure, online lottery transaction processing systems that are capable of processing over 500,000 transactions per minute. As of December 31, 2017 we provide more than 450,000 point-of-sale devices to lottery customers. We also produce high-quality instant ticket games and provide printing and related services such as instant ticket marketing plans and graphic design, programming, packaging, shipping and delivery services. We have developed and continue to develop new lottery games, license new game brands from third parties and install a range of new lottery distribution devices, all of which are designed to drive responsible same store sales growth for our customers. In connection with our delivery of lottery services, we actively advise our customers on growth strategies. We also provide marketing services, in particular retail optimization and lottery brand awareness campaigns. We work closely with lottery customers and retailers to help retailers sell lottery games more effectively. We leverage years of experience accumulated from being the license holder for the Italian Lotto, one of the world’s largest lotteries. This B2C expertise in Italy, which includes management of all of the activities along the lottery value chain, allows us to better serve B2B customers in our North America Lottery and International segments. Machine Gaming. We design, develop, manufacture and provide cabinets, games, systems and software for customers in regulated gaming markets throughout the world under fixed fee, participation and product sales contracts. We hold more than 450 global gaming licenses. Our diverse range of machine cabinets allows customers to maximize functionality, flexibility, and player comfort. In addition to cabinets, we develop a wide range of casino games taking into account local jurisdictional requirements, market dynamics and player preferences. Our casino games typically fall into two categories: premium games and core games. Premium games are typically not sold to customers but instead are provided on a leased basis through revenue sharing or a fixed daily fee arrangement, while core games, which include core video reel, core mechanical reel and core video poker, are typically sold and in some situations leased to customers. We also produce centrally determined games, which are connected to a central server that determines the game outcome, Class II games, which are electronic video bingo machines that can be typically found in North American tribal casinos and certain other jurisdictions like South Africa, and random number generated and live dealer electronic table games, including baccarat and roulette. Additionally, we provide video lottery terminals (VLTs, which are connected to a central system), VLT central systems and VLT game software primarily to government customers worldwide. We provide a dedicated client service team to each of our VLT and VLT systems customers. Finally, we provide amusement with prize machines (AWPs) and games to licensed operators in Italy and the rest of Europe. AWPs are typically low-denomination gaming machines installed in retail outlets and connected to a central system. Other Services. We provide sports betting technology to lotteries and commercial operators in regulated markets, primarily in Italy and other countries in Europe as well as in the U.S. We provide secure retail betting solutions, point-of-sale display systems, call center facilities, internet and mobile betting technology, and fixed odds or pool betting options. We operate an expansive land-based B2C betting network in Italy through its “Better” brand on a fixed-odds, pari-mutuel or virtual betting basis. Through sports betting point-of-sale locations, we offer directly to customers betting on sports events (including basketball, horse racing, soccer, cycling, downhill skiing, cross country skiing, tennis, sailing and volleyball), motor sports (car and motorcycle racing), and non-sports events connected with the world of entertainment, music, culture, and current affairs of national and international interest. We also offer a sports betting platform localized and certified for each market composed of either (i) core engine and associated support modules, as well as trading and risk management tools, provided to customers as a fully managed service, or (ii) “software only” technical solutions to create a complete one-stop solution or to integrate new functionality to existing operations. We develop innovative technology to enable lotteries to offer commercial services over their existing lottery infrastructure or over standalone networks separate from the lottery. Leveraging our distribution network and secure transaction processing experience, we offer high-volume processing of commercial transactions including prepaid cellular telephone recharges, bill payments, e-vouchers and retail-based programs, electronic tax payments, stamp duty services, prepaid card recharges, and money transfers. These services are primarily offered outside of North America. Interactive gaming (or iGaming) enables game play via the internet for real money. We design, manufacture, and distribute a full suite of award-winning configurable products, systems, and services including poker,
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table games, slot games, bingo, iLottery, mobile-to-retail products, player management systems and market intelligence services. We hold more than 20 interactive gaming licenses worldwide. We also act as a complete internet gaming operator in Italy and as a mobile casino operator. Our primary B2C interactive offerings are deployed in Italy. Our Competitive Strengths We believe there are a number of key factors that give us a competitive advantage, including the following: Leading Global Market Positions Across All Major Gaming Segments We are a global leader in gaming, with leading global market positions across all major gaming segments, including lottery, machine gaming, social gaming and interactive wagering.
Largest Global Lottery Company: We supply a unique set of lottery solutions to more than 100 customers worldwide, with market leading positions in Italy and the United States. We benefit from years of experience accumulated from being the concessionaire for the Italian Lotto game, one of the world’s largest lotteries (by revenue), which includes management of all of the activities along the lottery value chain. This B2C expertise in Italy allows us to better serve B2B customers in the North America Lottery, North America Gaming and Interactive and International segments because we can share with B2B customers the knowledge we develop from interacting with players. In the United States, we supply instant and online lottery solutions to 39 of the 45 U.S. state lotteries (including the District of Columbia) and have established relationships with many of the largest U.S. state lotteries, including the New York, California and Texas lotteries. Additionally, we have long-standing partnerships with leading European and Latin American lotteries, including the United Kingdom, Finland, Mexico and Colombia lotteries. We also have a growing presence as a major instant lottery ticket printing supplier.
Leading Global Machine Gaming Company: We are a leading, global gaming equipment company; we design, develop, manufacture and provide cabinets, games, systems and software for customers in regulated markets through fixed fee, participation and product sales contracts. Our market leading content library, including the highly successful slot titles Wheel of Fortune®, Fort Knox® and SPHINX 4D™, spans across all segments of gaming. In 2017, we had a leading position in the commercial segment of the machine gaming market in the United States and Canada combined with a top position in the VLT and AWP markets in Italy. In addition to central casino system management, we also offer a full suite of products that give players a seamless, customized gaming experience: the Cardless Connect™ app which offers a cardless, cashless loyalty solution for casino players, and mobile solutions that drive efficiencies and enable floor monitoring for operators while decreasing response time to player needs, including Mobile Host, Mobile Responder, and Mobile Notifier.
Leading Interactive Gaming Company: We design, manufacture, and distribute a full suite of business-to-business products and services for Internet gaming (or iGaming). We have an omnichannel offering that connects retail offerings to mobile device offerings; this allows us to launch the same premium brands across all channels (i.e., Wheel of Fortune® is a casino slot machine, VLT, iCasino game, eInstant game and an instant ticket in several jurisdictions) offering extension of gameplay across multiple platforms. We hold more than 20 interactive gaming licenses worldwide and also provide content and services to partnering businesses. Beneficiary of Key Market Trends With our end-to-end product offering, multi-channel capabilities and robust relationships across the client spectrum, we believe we are positioned to benefit from emerging gaming sector trends, including government stimulated growth, the emergence of multi-channel offerings and the increasing importance of proprietary content.
Consistent global growth across geographies and products: The global gaming market grew at a three percent (3%) compound annual growth rate from 2006 to 2016 and is forecasted to grow at a three percent (3%) compound annual growth rate from 2017 to 2022 according to the Global Betting and Gaming Consultants March 2018 global gaming forecasts. This survey, which measures and
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forecasts consumer spending on land-based and interactive gaming (excluding Social Gaming), anticipates low to mid-single digit growth across the spectrum of gaming activities: Lottery, Casinos, Gaming Machines, Betting and other.
Government stimulated growth: Government initiatives such as the legalization of casino operations in new jurisdictions, increases in the number of casinos allowed to operate in a given jurisdiction and the legalization of new products have helped stimulate growth in the gaming market. For example, in November 2011 a bill was signed into law that permits the establishment of casinos in Massachusetts and, in September 2014, Massachusetts awarded a developer a license to permit the construction of a casino resort in the greater Boston area; this will come into service in the coming years. Greece, which legalized land-based gaming in 2011, subsequently approved online gaming in 2016. New jurisdictions are expected to legalize lottery and gaming in the coming years. Other countries are examining the privatization of state lottery programs. In 2016, Brazil approved the privatization of their state lottery business, and in April 2018 the French government announced it was planning to sell approximately 50% of the French national lottery company via a stock market listing.
Emergence of multi-channel offerings: The increased prevalence of smart phones and tablets and the legalization of online gaming in Greece, Delaware, Nevada, New Jersey and other jurisdictions have provided new growth opportunities for gaming operators through the introduction of new channels and portals for delivering gaming content to customers. This supplements the existing broad based online gambling market across Europe. This environment enables true omnichannel product offerings; for example, Wheel of Fortune® is a casino slot machine, VLT, iCasino game, eInstant game and an instant ticket in several jurisdictions. Our multi-channel solutions and customer relationship management capabilities should position us to take advantage of new opportunities to extend our gaming solutions across different channels and reach new players, expand our player demographic base and access players wherever they are whenever they want to play. For example, we may be able to position ourselves for future online real-money gaming opportunities by offering play-for-fun online gaming options in jurisdictions where online real-money gaming is expected to be legalized in the future.
Increasing importance of proprietary content: We believe gaming industry convergence trends emphasize the importance of proprietary content, including licensed content. Such content is needed to successfully promote a compelling game offering across multiple platforms and to develop distinctive products for operator-clients. Proprietary content such as Wheel of Fortune®, SPHINX 4DTM and Cleopatra® are prime examples of content whose popularity drives engagement across gaming platforms. Our full suite of high quality gaming products, services and multichannel distribution capabilities, extensive traditional content library, sizeable machine gaming installed base and deep relationships with operator-customers should make us an attractive partner for potential licensors of branded content.
Ability to gather and respond to customer feedback: We adopted a player-centric development approach, segmenting our portfolio based on player preferences. To put this into action, we develop and pre-test content locally to stay close to the market. We also conduct yearly live meetings to receive customer feedback and integrate their perspective into the product and service roadmap moving forward. We then have less formal quarterly touchpoints to update our customers on results and achievements. We also redefined our organizational approach with a single point of contact for each of our customers, supported by a strong and specialized content management team. Leading Proprietary Technology with Track Record of Innovation We are at the forefront of our industry in terms of technology and innovation. We combine complementary expertise in technology and operations, positioning us as a provider of superior technical solutions. As of December 31, 2017, we held approximately 5,000 patents and patent applications and approximately 7,600 trademarks worldwide, while spending $71.3 million in R&D for the three months ending March 31, 2018. We focus our product development efforts on emerging technology trends, utilizing a combination of customer research, design experience and engineering excellence. We are committed to innovation for our customers and focused on improving player entertainment and customer profitability. For instance, our True3D and True4D product lines enhance the video slot gaming experience. IGT PlaySpot™ mobile
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solution, another innovation, allows casino customers to make mobile wagers even when not physically on the casino floor, and was named Lottery Product of the Year at the 2017 International Gaming Awards ceremony. In addition, our SPHINX 4D™ game and Cardless Connect™ mobile technology won Land-Based Gaming Innovation of the Year and Land-Based Product of the Year, respectively, at the Global Gaming Awards. Extensive Geographic Reach and Customer Diversification We have global scale to complement our geographic and customer diversification. We provide B2C and B2B products and services to customers in over 100 countries worldwide on six continents. Our lottery businesses supply solutions to more than 100 customers worldwide; we have more than 450,000 point-of-sale devices to lottery customers and lotteries worldwide as of December 31, 2017. Our top machine gaming customers are among the largest, multinational operators. Interactive games and proprietary content provide additional breadth and reach. Significant Percentage of Recurring Revenue In 2017, 84% of our revenue was recurring revenue. We operate long-term lottery contracts which benefit from high barriers to entry and significant switching costs. A typical service contract has an initial term of five to ten years and grants the lottery authority multiple extension options. After the expiration of the initial or extended contract term, a lottery authority generally either negotiates further extension options or commences a new bidding process. Our global gaming installed base, approximately 70,500 machines as of March 31, 2018, generates consistent revenue while in operation. These dynamics help us to generate stable, consistent cash flow. Proven Track Record of EBITDA Generation and Debt Reduction Our business generates a substantial amount of Adjusted EBITDA; in each of the previous three years, we generated in excess of $1,600.0 million of Adjusted EBITDA. Combined with management’s disciplined approach to capital allocation and the use of the proceeds from the Double Down Sale, this has allowed us to reduce our total debt from $8.748 billion as of September 30, 2015 to $8.094 billion as of March 31, 2018. In addition, despite continued investment in our businesses and payment of cash dividends, we have reduced our ratio of net debt to Adjusted EBITDA from 4.81x for the trailing twelve months ended September 30, 2015 to 4.32x for the trailing twelve months ended March 31, 2018. Highly Experienced Management Team We have a highly experienced management team and Board of Directors. Our chief executive officer is Marco Sala, and our chairman is Philip Satre. Our management team has extensive experience in various global gaming businesses and a proven track record of driving profitability and cash generation across our portfolio of businesses. Our Board of Directors has an average tenure of nine years, and in aggregate over 122 years of experience in the gaming sector, which we believe gives them detailed knowledge of our businesses and customers and the ability to help us identify and pursue opportunities in the evolving gaming industry. See “Item 6. Directors, Senior Management and Employees” of the 2017 Annual Report on Form 20-F. Our Strategies Our objective is to maintain our leading presence in the gaming industry through the following strategies: Continue to Leverage Distinctive Leadership Position We intend to keep our global leadership position by maintaining excellent government and customer relationships; these stable customer relationships should provide us with recurring and predictable revenue streams and give us valuable insight into our customers’ needs. We intend to provide each customer with a single point of contact, and we strive to provide a full product offering to each customer. Additionally, we seek to provide customized products and services to meet local market regulations and support player preferences. Our significant R&D investments strive to develop content and products which we can then distribute across all available platforms and technologies. We also plan to strengthen our role as the industry’s leading innovator by introducing new platforms and point of access devices.
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Grow Lottery Worldwide While Preserving Leading Positions in Italy and Across the U.S. We seek to maintain our market position in lotteries as we continue to operate in sophisticated lottery markets, while also driving growth in the overall market. We will provide and operate highly secure, online lottery transaction processing systems to regulated markets and deliver technologically advanced instant game tickets and related services. More specifically, in the U.S. we are focused on continuing to drive same-store sales growth and achieving growth in instant tickets by innovating game development, modernizing customer and retailer technology solutions, and driving customer engagement, loyalty and performance. We plan to continue pursuing new international contracts. We will also seek to expand our instant ticket printing customer base and have invested in additional production capacity to do so. Internationally, we are focused on securing several new contracts, rebids and multiple contract extensions to aim thereby to strengthen our recurring revenue stream and leverage the wins on future competitive positioning for upcoming contract opportunities. In Italy, leveraging our digital product innovation and channel convergence will help drive long term wager stability and modest growth. Regain Top Position in U.S. Gaming Market and Expand Gaming Internationally We will seek to regain our market-leading position in the land-based casino business in North America by supporting a reinvigoration in the premium recurring category, recapturing market share in the core business and expanding into new gaming verticals and concepts. We aim to achieve this through focusing R&D investment, improving disciplined game and cabinet development, comprehensive customer engagement and developing better player insights. We also strive to increase our systems’ market share with our innovative technology solutions, and we hope to increase our market share in under-penetrated segments such as the electronic table games and Class II segments. Moreover, we seek to increase market positioning in gaming operations and product sales through an expansion of localized content in international markets. In Italy, we intend to leverage existing content and drive content development to deliver across our strengthened distribution network. We also believe we will add to our existing gaming machine operator and retailer business in Italy by leveraging our gaming technology solutions and unique and expansive content library. Expand Interactive Gaming Business and Distribution of Our Content Library We intend to expand our interactive gaming business through a number of initiatives, including by growing iLottery solutions, services, and professional expertise, which allows lotteries to fully engage their players on any interactive channel in regulated markets. We also intend to exploit emerging real-money interactive opportunities by exploiting upselling opportunities for combined customers. We believe that we will be positioned to provide real-money gaming or play-for-fun solutions to lotteries and casinos in newly regulated or to-be regulated jurisdictions. We expect that we will be able to further monetize our interactive gaming platform solution by offering it to our land-based casino systems customers. In particular, we believe we are well-positioned to pursue sports betting opportunities in the United States, and we hope to improve digital and sports betting product offerings in Italy to further expand our interactive gaming business there through a strengthened product offering, improved product quality and other enhancements. Also, we entered into a multi-year strategic partnership with DoubleU Games Co., Ltd. (“DoubleU”) which will enable our extensive casino game library to be offered on DoubleU’s combined social casino platforms in exchange for royalties to us. Recent Developments The Tender Offer On June 18, 2018, we launched a tender offer to purchase for cash an aggregate €500.0 million principal amount of the Target Notes less the premium payable thereon (the “Tender Offer”). The Tender Offer is expected to expire on or about June 25, 2018, and holders who tender in the Tender Offer prior to the Expiration Time will receive the applicable tender consideration on or about the Issue Date. The consummation of the Tender Offer is conditioned on the offering and sale of the Notes. BNP Paribas, Deutsche Bank and Société Générale are acting as Dealer Managers for the Tender Offer. We expect that the gross proceeds from the offering and sale of the Notes will be approximately €500 million ($615.0 million calculated at an exchange rate of $1.23 per €1.00 which was the exchange rate used in the preparation of our March 31, 2018 balance sheet). We expect to use the proceeds of the offering and sale of
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the Notes to: (i) pay for the Target Notes in connection with the Tender Offer; and (ii) pay certain fees and expenses in connection with the Transactions. If the amount of the proceeds of the offering and sale of the Notes is greater than the amount we spend in connection with the Transactions, then we will use the balance for other corporate purposes, including potentially purchasing or redeeming certain of the Existing Notes other than the Target Notes. Internal Investigation We were recently informed of findings by the State of Washington’s Office of Financial Management with respect to an investigation into potential ethics violations by Washington state lottery employees who may have received items of value from various vendors, including us, beyond allowable limits. As a result, we have begun an internal investigation. For more information, see the Report on Form 6-K. The Issuer The Issuer is incorporated as a public limited company under the laws of England and Wales. Our principal office is located at Marble Arch House, Second Floor, 66 Seymour Street, London W1H 5BT, England, telephone number +44 (0) 207 535 3200.
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CORPORATE STRUCTURE AND CERTAIN FINANCING ARRANGEMENTS The following diagram is a simplified summary of our corporate structure and material debt financings. The diagram is intended for illustrative purposes only and does not include all subsidiaries or debt financings of the Issuer and its subsidiaries. All percentage ownership is 100% unless otherwise indicated. For further information, see “Use of Proceeds.” For a summary of the material financing arrangements identified in this diagram, see “Description of Other Indebtedness” and “Description of the Notes.”
______(1) For the trailing twelve months ended March 31, 2018, the Issuer, on a standalone basis, represented (2)% ($(40) million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the Issuer, on a standalone basis, represented 151% ($3,513 million) of the Group’s net assets. For the year ended December 31, 2017, the Issuer, on a standalone basis, represented (2)% ($(38) million) of the Group’s consolidated Adjusted EBITDA. As of December 31, 2017, the Issuer, on a standalone basis, represented 156% ($3,672 million) of the Group’s net assets. For more information regarding our net assets calculation, see “Presentation of Financial Information–non-U.S. GAAP Financial Measures”.
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(2) The Notes will be guaranteed on a senior basis by IGT US OpCo, IGT Canada Solutions ULC, IGT Foreign Holdings Corporation, IGT Germany Gaming GmbH, IGT Global Solutions Corporation, IGT US HoldCo and the Italian Guarantor (the “Guarantors”). For the three months ended March 31, 2018, the Issuer and the Guarantors collectively represented 43% ($513 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, the Issuer and the Guarantors collectively represented 30% ($528 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the Issuer and the Guarantors collectively represented 196% ($4,542 million) of the Group’s net assets. For the year ended December 31, 2017, the Issuer and the Guarantors collectively represented 43% ($2,130 million) of the Group’s consolidated total revenue and 31% ($514 million) of the Group’s consolidated Adjusted EBITDA. As of December 31, 2017, the Issuer and the Guarantors collectively represented 201% ($4,724 million) of the Group’s net assets. For the three months ended March 31, 2018, the Guarantors collectively represented 43% ($513 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, the Guarantors collectively represented 33% ($568 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the Guarantors collectively represented 44% ($1,030 million) of the Group’s net assets. For the year ended December 31, 2017, the Guarantors collectively represented 43% ($2,130 million) of the Group’s consolidated total revenue and 33% ($552 million) of the Group’s consolidated Adjusted EBITDA. As of December 31, 2017, the Guarantors collectively represented 45% ($1,052 million) of the Group’s net assets. For more information regarding our net assets calculation, see “Presentation of Financial Information–non-U.S. GAAP Financial Measures”. The Guarantors also guarantee the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes, and the Existing IGT US HoldCo Notes. Our obligations under the Notes and the obligations of the Guarantors under the Guarantees are secured by the Collateral, which also secure the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes, and the Existing IGT US HoldCo Notes (which are required to be secured only to the extent the Collateral constitutes property or assets of IGT US HoldCo or a subsidiary of IGT US HoldCo) on an equal and ratable basis to the Notes. (3) The Italian Guarantor is the holding company holding the shares of the subsidiaries party to various concessions from the Italian government (including the Lotto concession). (4) Following the use of the proceeds of the offering and sale of the Notes as described under “Use of Proceeds,” the balance of the Existing Notes will remain outstanding. As of March 31, 2018, after giving effect to the Transactions, we would have had an aggregate of approximately $8,131.7 million of total debt, of which $8,087.3 million would be secured. On June 18, 2018, we launched the Tender Offer. For further details, please see “Summary—Recent Developments—The Tender Offer.” Given our intended use of the proceeds, we believe the transactions should not materially impact our amount of outstanding indebtedness. (5) For the three months ended March 31, 2018, the non-Guarantor subsidiaries collectively represented 57% ($693 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, the non-Guarantor subsidiaries represented 70% ($1,212 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the non-Guarantor subsidiaries represented (96)% ($(2,223) million) of the Group’s net assets. For the year ended December 31, 2017, the non-Guarantor subsidiaries collectively represented 57% ($2,809 million) of the Group’s consolidated total revenue and 69% ($1,162 million) in consolidated Adjusted EBITDA. As of December 31, 2017, the non-Guarantor subsidiaries collectively represented (101)% ($(2,369) million) of the Group’s net assets. For more information regarding our net assets calculation, see “Presentation of Financial Information–non-U.S. GAAP Financial Measures”. (6) As of the date hereof, De Agostini S.p.A. holds 50.72% of our ordinary shares and has 67.30% of the total voting power. On May 21, 2018, De Agostini S.p.A. entered into a variable forward transaction relating to 18,000,000 of our ordinary shares. If De Agostini S.p.A. were to sell or transfer all of our ordinary shares underlying the variable forward transaction, De Agostini S.p.A would hold 41.89% of our ordinary shares and would have 59.04% of the total voting power.
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THE OFFERING This summary must be read as an introduction to this Offering Memorandum and any decision to invest in the Notes should be based on a consideration of this Offering Memorandum (including the 2017 Annual Report on Form 20-F and the Report on Form 6-K incorporated by reference herein) as a whole. Words and expressions defined in the section entitled “Description of the Notes” in this Offering Memorandum shall have the same meanings in this summary. For a detailed description of the Notes, please refer to “Description of the Notes.” Issuer ...... International Game Technology PLC (the “Issuer”) is incorporated as a public limited company under the laws of England and Wales. Notes Offered ...... €500.0 million aggregate principal amount of 3.500% Senior Secured Notes due 2024 (the “Notes”). Issue Date ...... June 27, 2018 (the “Issue Date”). Maturity Date ...... July 15, 2024. Interest ...... 3.500%. Interest Payment Date ...... Semi-annually in cash in arrears on January 15 and July 15 of each year, to the holders of record of each series of Global Notes at the close of business on the business day preceding January 15 and July 15, respectively, and to the holders of record of each series of Definitive Record Notes at the close of business on the day that is fifteen (15) days preceding January 15 and July 15, respectively. The first interest payment date will be January 15, 2019. Issue Price ...... 100.0% plus accrued interest, if any, from the Issue Date. Forms and Denomination ...... The Notes will be issued in global form in minimum denominations of €100,000 and integral multiples of €1,000 in excess thereof maintained in Book-Entry form. Notes in denominations of less than €100,000 will not be available. Ranking of the Notes ...... The Notes:
will be our senior secured obligations;
will rank pari passu in right of payment to all of our existing and future indebtedness that is not subordinated in right of payment to the Notes, including the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes and the Existing IGT US HoldCo Notes;
will rank senior in right of payment to all of our existing and future indebtedness that is expressly subordinated in right of payment to the Notes;
will be effectively subordinated to any of our existing and future indebtedness that is secured by property or assets that do not secure the Notes, to the extent of the value of the property and assets securing such indebtedness; and
be structurally subordinated to any existing and future indebtedness of our subsidiaries that do not guarantee the Notes. Guarantees ...... The Notes will be guaranteed on a senior basis by each of IGT US OpCo, IGT Canada Solutions ULC, IGT Foreign Holdings Corporation, IGT Germany Gaming GmbH, IGT Global Solutions Corporation, IGT US
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HoldCo and the Italian Guarantor (the “Guarantors”) and the Guarantors will execute and deliver the Indenture providing for a guarantee of the Notes (a “Guarantee”) on a senior basis. As of March 31, 2018, after giving effect to the Transactions:
we and our consolidated subsidiaries would have had approximately $8,131.7 million of total debt, of which $615.0 million is represented by the Notes; and
we and our consolidated subsidiaries would have had approximately $8,087.3 million of secured debt, of which $615.0 million is represented by the Notes. For the three months ended March 31, 2018, we and the Guarantors collectively represented 43% ($513 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, we and the Guarantors collectively represented 30% ($528 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, we and the Guarantors collectively represented 196% ($4,542 million) of the Group’s net assets. The Guarantors guarantee the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes and the Existing IGT US HoldCo Notes. Ranking of the Guarantees ...... The Guarantees:
will be senior obligations of the applicable Guarantor;
will rank pari passu in right of payment with all of the applicable Guarantor’s existing and future senior indebtedness that is not subordinated to such Guarantee, including its guarantee of the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes and the Existing IGT US HoldCo Notes;
will rank senior in right of payment to all existing and future indebtedness of the applicable Guarantor that is expressly subordinated in right of payment to its Guarantee; and
will be effectively subordinated to any existing and future indebtedness of the relevant Guarantor that is secured by property or assets that do not secure its Guarantee, to the extent of the value of the property and assets securing such indebtedness. The Guarantees will be limited by applicable law or subject to certain defenses that may limit their validity or enforceability. See “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests.” Security ...... The Notes and the Guarantees will be secured within 90 days of the Issue Date by a first-ranking security interest in the following (the “Collateral”): (i) pledges over the shares of common stock of IGT US HoldCo and the quotas of the Italian Guarantor (which pledges will only secure the Notes and will not secure the Guarantees); and (ii) assignments of intercompany loans or notes in excess of $10.0 million (x) under which any obligor under the Revolving Credit
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Facilities is the creditor and a subsidiary of the Issuer is a debtor or (y) under which any subsidiary of the Issuer is a creditor and an obligor under the Revolving Credit Facilities. The Collateral also secures on a pari passu basis the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes and the Existing IGT US HoldCo Notes (which are required to be secured only to the extent the Collateral constitutes property or assets of the IGT US HoldCo or a subsidiary of IGT US HoldCo) and certain hedging obligations and may also secure certain future indebtedness. The Collateral will be granted subject to the terms of the Intercreditor Agreement, certain agreed security principles and terms of the security documents. See “Description of Other Indebtedness—Intercreditor Agreement.” The security interest in the Collateral may be released under certain circumstances. See “Description of Other Indebtedness—Intercreditor Agreement” and “Description of the Notes—Security.” Optional Redemption ...... Prior to January 15, 2024 the Issuer may at its option redeem some or all of the Notes by paying a “make-whole” premium, plus accrued and unpaid interest and additional amounts, if any. After such date, the Issuer may at its option redeem some or all of the Notes at par, plus accrued and unpaid interest, if any, as set forth under “Description of the Notes—Redemptions—Optional Redemption.” Tax Redemption ...... We may redeem all but not less than all of the Notes, at a redemption price of 100% of the principal amount, plus accrued and unpaid interest and additional amounts, if any, to the redemption date, if we would become obligated to pay certain additional amounts as a result of certain changes in specified tax laws or certain other circumstances. See “Description of the Notes—Redemptions—Redemption for Changes in Withholding Taxes.” Additional Amounts ...... All payments made by or on our behalf or on behalf of any Guarantor under or with respect to the Notes will be made without withholding or deduction for taxes in any relevant taxing jurisdiction unless required by law. If any such withholding or deduction for taxes is required by law to be made with respect to any payment under the Notes or any Guarantee, subject to certain exceptions, we will pay the additional amounts necessary so that the net amount received by the holders of Notes after such withholding (including any withholding or deduction in respect of the additional amounts) is not less than the amount that such holders would have received in the absence of such withholding or deductions. See “Description of the Notes—Withholding Taxes.” Change of Control ...... Upon the occurrence of certain events constituting a change of control as defined in the Indenture, we may be required to make an offer to repurchase all of the Notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any. See “Description of the Notes—Change of Control.” Certain Covenants ...... The Indenture will, among other things, restrict the ability of us and the Guarantors, respectively, to:
create liens upon its assets to secure debt for borrowed money;
guarantee certain types of our or the Guarantors’ other indebtedness without also guaranteeing the Notes; and
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impair the security interests in the Collateral for the benefit of the holders of Notes. In addition, the Indenture will limit the amount of non-Guarantor subsidiary indebtedness. These covenants are subject to important exceptions and qualifications. See “Description of the Notes—Certain Covenants.” Use of Proceeds ...... We expect that the gross proceeds from the offering and sale of the Notes will be approximately €500 million ($615.0 million calculated at an exchange rate of $1.23 per €1.00 which was the exchange rate used in the preparation of our March 31, 2018 balance sheet). We expect to use the proceeds to: (i) pay for the Target Notes in connection with the Tender Offer; and (ii) pay certain fees and expenses in connection with the Transactions. If the amount of the proceeds from the offering and sale of the Notes is greater than the amount we spend in connection with the Transactions, then we will use the balance for other corporate purposes, including potentially purchasing or redeeming certain of the Existing Notes other than the Target Notes. See “Use of Proceeds.” Transfer Restrictions ...... The Notes have not been registered under the U.S. Securities Act and thus are subject to restrictions on transferability and resale. See “Notice to Investors.” Absence of a Public Market for the Notes ...... The Notes will be new securities for which there is currently no established trading market. Although the Initial Purchasers currently intend to make a market in the Notes, they are not obligated to do so and any market making with respect to the Notes may be discontinued without notice. See “Plan of Distribution.” Accordingly, there can be no assurance that a market for the Notes will develop or, if a market develops, that the market will be a liquid market. Listing ...... Application has been made by the Issuer for the Notes to be listed on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market of Euronext Dublin. The Global Exchange Market is not a regulated market pursuant to the provisions of Directive 2014/65/EU. Irish Listing Agent ...... The Bank of New York Mellon SA/NV, Dublin Branch. Original Issue Discount ...... The Notes may be issued with original issue discount (“OID”) for U.S. federal income tax purposes. If the stated principal amount of the Notes exceeds their “issue price” by an amount equal to or more than a statutorily defined de minimis amount, the Notes will be treated as issued with OID for U.S. federal income tax purposes. In such case a U.S. holder, whether on the cash or accrual method of tax accounting, would be required to include any amounts representing OID in gross income (as ordinary income) as it accrues on a constant yield to maturity basis for U.S. federal income tax purposes in advance of the receipt of cash payments to which such OID is attributable. For more information, see “Tax Considerations—Certain U.S. Federal Income Tax Considerations.” Trustee ...... BNY Mellon Corporate Trustee Services Limited. Paying Agent and Transfer Agent...... The Bank of New York Mellon, London Branch.
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Registrar ...... The Bank of New York Mellon SA/NV, Luxembourg Branch. Security Agent ...... NatWest Markets Plc. Governing Law of the Notes and the Indenture ...... New York. Governing Law of the Intercreditor Agreement ...... England and Wales. Governing Law of the Security Documents ...... England and Wales, New York and Italy.
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SUMMARY HISTORICAL FINANCIAL INFORMATION AND OTHER DATA The summary consolidated financial data as of and for the years ended December 31, 2017, 2016 and 2015 set forth below have been derived from our audited consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Our summary unaudited interim consolidated financial data as of and for the three-month periods ended March 31, 2018 and 2017 set forth below have been derived from our unaudited interim condensed consolidated financial statements prepared in accordance with U.S. GAAP. Our audited financial statements as of and for the years ended December 31, 2017, 2016 and 2015 are contained in the 2017 Annual Report on Form 20-F, which is incorporated by reference herein, and our unaudited interim condensed consolidated financial statements as of and for the three-month periods ended March 31, 2018 and 2017 are contained in the Report on Form 6-K incorporated by reference herein. The information set forth below should be read in conjunction with the sections of this Offering Memorandum entitled “Presentation of Financial and Other Information” and “Risk Factors,” and with the Annual Financial Statements and the Interim Financial Statements. Consolidated Statements of Operations
For the trailing twelve months ended For the three months ended March 31, March 31, For the year ended December 31, 2018(1) 2018(2) 2017 2017 2016 2015 ($ thousands) Service revenue ...... 4,156,562 1,046,951 1,026,945 4,136,556 4,375,586 3,977,693 Product sales ...... 836,769 160,005 125,639 802,403 778,310 711,363 Total revenue ...... 4,993,331 1,206,956 1,152,584 4,938,959 5,153,896 4,689,056 Cost of services ...... 2,546,847 618,058 624,294 2,553,083 2,553,479 2,417,315 Cost of product sales ...... 568,446 103,351 114,336 579,431 582,358 520,343 Selling, general and administrative ...... 830,787 215,218 200,524 816,093 945,824 795,252 Research and development ...... 301,730 71,263 82,621 313,088 343,531 277,401 Restructuring expense ...... 32,625 2,016 9,267 39,876 27,934 76,896 Impairment loss ...... 715,220 — — 715,220 37,744 12,497 Transaction (income) expense, net ...... (29,006) 55 2,321 (26,740) 2,590 49,396 Total operating expenses ...... 4,966,649 1,009,961 1,033,363 4,990,051 4,493,460 4,149,100 Operating income (loss) ...... 26,682 196,995 119,221 (51,092) 660,436 539,956 Interest income ...... 10,809 2,999 2,626 10,436 12,840 17,681 Interest expense ...... (454,379) (110,279) (114,799) (458,899) (469,268) (457,984) Foreign exchange (loss) gain, net ...... (493,835) (96,695) (46,837) (443,977) 101,040 5,611 Other (expense) income, net ...... (33,079) 2,981 2,667 (33,393) 18,365 (122,295) Total non-operating expenses...... (970,484) (200,994) (156,343) (925,833) (337,023) (556,987) (Loss) income before provision for (benefit from) income taxes ...... (943,802) (3,999) (37,122) (976,925) 323,413 (17,031) Provision for (benefit from) income taxes ...... 41,421 60,505 (10,330) (29,414) 59,206 38,896 Net (loss) income ...... (985,223) (64,504) (26,792) (947,511) 264,207 (55,927) Less: Net income attributable to non-controlling interests ...... 62,567 18,316 11,149 55,400 45,413 19,647 Less: Net income attributable to redeemable non-controlling interests ...... 69,142 20,326 16,849 65,665 7,457 — Net (loss) income attributable to IGT PLC ...... (1,116,932) (103,146) (54,790) (1,068,576) 211,337 (75,574) ______(1) Derived by adding our unaudited financial information for the three months ended March 31, 2018 to the difference between our audited financial information for the year ended December 31, 2017 and our unaudited financial information for the three months ended March 31, 2017. As a result of the adoption of ASC 606 using a modified retrospective application approach on January 1, 2018, the months included prior to January 1, 2018 are not comparable. Our unaudited financial information for the trailing twelve months ended March 31, 2018 has been prepared for illustrative purposes only. See “Presentation of Financial Information—Financial Information for the Trailing Twelve Months Ended March 31, 2018”. (2) Amounts reflect the adoption of ASC 606 on a modified retrospective basis in the first quarter of 2018. Therefore, periods prior to January 1, 2018 presented herein are not comparable. See “Notes to Condensed Consolidated Financial Statements—2. Summary of Significant Accounting Policies—New Accounting Standards - Recently Adopted” of the Report on Form 6-K.
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Consolidated Balance Sheets
As of March 31, As of December 31, 2018 2017 2016 ($ thousands) ASSETS Total current assets ...... 2,644,705 3,064,517 2,289,566 Of which: Trade and other receivables, net ...... 953,342 937,854 947,237 Cash and cash equivalents ...... 569,620 1,057,418 294,094 Total non-current assets ...... 12,060,202 12,094,691 12,770,596 Of which: Goodwill ...... 5,739,554 5,723,815 6,810,012 Intangible assets, net ...... 2,220,681 2,273,460 2,874,031 Total assets ...... 14,704,907 15,159,208 15,060,162 LIABILITIES AND EQUITY Total current liabilities ...... 2,970,611 3,676,677 2,341,791 Of which: Accounts payable ...... 1,192,750 1,240,753 1,216,079 Current portion of long-term debt ...... — 599,114 77 Total non-current liabilities ...... 9,037,761 8,770,683 9,069,565 Of which: Long-term debt, less current portion ...... 8,049,791 7,777,445 7,863,085 Redeemable non-controlling interests ...... 377,243 356,917 223,141 Total shareholders’ equity ...... 2,319,292 2,354,931 3,425,665 Total liabilities, redeemable non-controlling interests and shareholders’ equity ...... 14,704,907 15,159,208 15,060,162 Consolidated Statements of Cash Flows
For the three months ended March 31, For the year ended December 31, 2018 2017 2017(1) 2016(1)(2) 2015(1)(2) ($ thousands) Net cash provided by operating activities(3) ...... 77,210 293,552 685,928 281,332 769,568 Net cash (used in) provided by investing activities(3) ...... (131,841) (10,696) 298,665 (315,985) (3,335,410) Net cash flows (used in) provided by financing activities ...... (463,233) (96,295) (246,972) (312,139) 2,920,166 Net (decrease) increase in cash and cash equivalents and restricted cash(3)...... (517,864) 186,561 737,621 (346,792) 354,324 Effect of exchange rate changes on cash and cash equivalents and restricted cash ...... 28,707 (1,885) 25,703 13,402 (34,262) Cash and cash equivalents and restricted cash at the beginning of the period(3) ...... 1,305,430 541,316 294,094 627,484 307,422 Cash and cash equivalents and restricted cash at the end of the period(3) ...... 816,273 725,992 1,057,418 294,094 627,484 ______(1) As reported in the 2017 Annual Report on Form 20-F. For figures as adjusted following our retrospective adoption in the first quarter of 2018 of ASU 2016-18, see footnote 3; see also “Presentation of Financial Information.” (2) As discussed in Note 1 to the 2017 Annual Report on Form 20-F, we have restated our consolidated statement of cash flows for the years ended December 31, 2016 and 2015 to correct misstatements. (3) The table set forth below reflects the impacts to our consolidated statements of cash flows in prior periods as a result of adopting ASU 2016-18 on a retrospective basis.
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For the year ended December 31, 2017 2016 2015 Impact of Impact of Impact of As ASU As As ASU As As ASU As (1) Reported 2016-18 Adjusted Reported 2016-18 Adjusted Reported 2016-18 Adjusted ($ thousands) Net cash provided by operating activities ...... 685,928 (22,540) 663,388 281,332 56,722 338,054 769,568 49,076 818,644 Net cash provided by (used in) investing activities ...... 298,665 (3,099) 295,566 (315,985) (23,456) (339,441) (3,335,410) 38,602 (3,296,808) Net increase (decrease) in cash and cash equivalents and restricted cash ...... 737,621 (25,639) 711,982 (346,792) 33,266 (313,526) 354,324 87,678 442,002 Effect of exchange rate changes on cash and cash equivalents and restricted cash...... 25,703 26,429 52,132 13,402 (3,748) 9,654 (34,262) (10,773) (45,035) Cash and cash equivalents and restricted cash at the beginning of the period ...... 294,094 247,222 541,316 627,484 217,704 845,188 307,422 140,799 448,221 Cash and cash equivalents and restricted cash at the end of the period ...... 1,057,418 248,012 1,305,430 294,094 247,222 541,316 627,484 217,704 845,188 ______(1) In connection with the adoption of ASU 2016-18, the Company corrected its balance sheet as of December 31, 2015 to include additional amounts of current restricted cash and cash equivalents of $48.6 million which had previously been offset against current liabilities of the same amounts. Accordingly, the revised total amount of restricted cash and cash equivalents as of December 31, 2015 is $169.1 million which resulted in a corresponding adjustment to operating activities of $25.6 million, which is reflected in the ASU 2016-18 adjustments for the year ended December 31, 2015. See “Presentation of Financial Information.” Business Activities Segment Data Segment Revenue
For the trailing twelve months ended For the three months ended March 31, March 31, For the year ended December 31, 2018(1) 2018(2) 2017 2017 2016(3) 2015(3) ($ thousands) Italy ...... 1,786,312 483,144 401,882 1,705,050 1,761,138 1,704,056 North America Gaming and Interactive ...... 1,096,063 243,751 305,386 1,157,698 1,373,454 1,101,793 North America Lottery ...... 1,199,765 295,399 280,856 1,185,222 1,193,575 1,045,670 International ...... 909,267 184,485 164,282 889,064 827,305 853,078 Segment Total ...... 4,991,407 1,206,779 1,152,406 4,937,034 5,155,472 4,704,597 Corporate support ...... 1,203 — — 1,203 — — Purchase accounting(4) ...... 721 177 178 722 (1,576) (15,541) Total revenue ...... 4,993,331 1,206,956 1,152,584 4,938,959 5,153,896 4,689,056 ______(1) Derived by adding our unaudited financial information for the three months ended March 31, 2018 to the difference between our audited financial information for the year ended December 31, 2017 and our unaudited financial information for the three months ended March 31, 2017. As a result of the adoption of ASC 606 using a modified retrospective application approach on January 1, 2018, the months included prior to January 1, 2018 are not comparable. Our unaudited financial information for the trailing twelve months ended March 31, 2018 has been prepared for illustrative purposes only. See “Presentation of Financial Information—Financial Information for the Trailing Twelve Months Ended March 31, 2018”. (2) Amounts reflect the adoption of ASC 606 on a modified retrospective basis in the first quarter of 2018. Therefore, periods prior to January 1, 2018 presented herein are not comparable. (3) Reclassified to reflect changes to management reporting lines within functions that support the Issuer’s segments. See 2017 Annual Report on Form 20-F. (4) Purchase accounting principally represents the depreciation and amortization of acquired tangible and intangible assets in connection with acquired companies.
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Segment Operating Income
For the trailing twelve months ended For the three months ended March 31, March 31, For the year ended December 31, 2018(1) 2018 2017 2017 2016(2) 2015(2) ($ thousands) Italy ...... 501,691 147,134 123,983 478,540 583,504 555,223 North America Gaming and Interactive ...... 267,615 57,159 68,507 278,963 349,275 295,531 North America Lottery ...... 296,487 76,396 68,934 289,025 299,182 181,813 International ...... 178,208 21,559 7,150 163,799 142,200 164,190 Segment Total ...... 1,244,001 302,248 268,574 1,210,327 1,374,161 1,196,757 Corporate support(3) ...... (207,921) (53,322) (42,490) (197,089) (245,600) (292,371) Purchase accounting(4) ...... (1,009,398) (51,931) (106,863) (1,064,330) (468,125) (364,430) Total operating income (loss) ...... 26,682 196,995 119,221 (51,092) 660,436 539,956 ______(1) Derived by adding our unaudited financial information for the three months ended March 31, 2018 to the difference between our audited financial information for the year ended December 31, 2017 and our unaudited financial information for the three months ended March 31, 2017. Our unaudited financial information for the trailing twelve months ended March 31, 2018 has been prepared for illustrative purposes only. See “Presentation of Financial Information—Financial Information for the Trailing Twelve Months Ended March 31, 2018”. (2) Reclassified to reflect changes to management reporting lines within functions that support the Issuer’s segments. See 2017 Annual Report on Form 20-F. (3) Corporate support expenses are principally composed of selling, general and administrative expenses and other expenses that are managed at the corporate level, including restructuring, transaction, corporate headquarters and Board of Directors’ expenses. (4) Purchase accounting principally represents the depreciation and amortization of acquired tangible and intangible assets in connection with acquired companies. Other Financial Information
As of and for the trailing twelve months ended As of and for the three March 31, months ended March 31, As of and for the year ended December 31, 2018 2018 2017 2017 2016 2015 ($ thousands) Adjusted EBITDA(1) ...... 1,740,581 436,156 371,163 1,675,588 1,755,294 1,610,684 Adjusted EBITDA Margin ...... 34.9% 36.1% 32.2% 33.9% 34.1% 34.3% Capital Expenditures(2) ...... (660,619) (134,661) (172,052) (698,010) (541,943) (376,521) Free Operating Cash Flows(3) ...... (213,573) (57,451) 121,500 (34,622) (203,889) 442,123 Cash and cash equivalents ...... 569,620 569,620 463,296 1,057,418 294,094 627,484 Interest expense(4) ...... (454,379) (110,279) (114,799) (458,899) (469,268) (457,984) Ratio of Net Debt to Adjusted EBITDA ...... 4.32x — — 4.37x 4.31x 4.78x Ratio of Adjusted EBITDA to interest expense ..... 3.83x 3.96x 3.23x 3.65x 3.74x 3.52x ______(1) The following table provides a reconciliation of Adjusted EBITDA to net income:
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For the trailing twelve months ended For the three months ended March 31, March 31, For the year ended December 31, 2018 2018 2017 2017 2016 2015 ($ thousands) Net (loss) income ...... (985,223) (64,504) (26,792) (947,511) 264,207 (55,927) Provision for (benefit from) income taxes ...... 41,421 60,505 (10,330) (29,414) 59,206 38,896 Non-operating expenses ..... 970,484 200,994 156,343 925,833 337,023 556,987 Impairment loss ...... 715,220 — — 715,220 37,744 12,497 Depreciation ...... 407,251 98,087 91,921 401,085 390,448 369,564 Amortization ...... 353,506 68,392 116,241 401,355 492,021 410,264 Service revenue amortization ...... 217,025 56,650 49,399 209,774 116,980 107,812 Restructuring expense ...... 32,625 2,016 9,267 39,876 27,934 76,896 Stock-based compensation expense ...... 18,033 14,178 849 4,704 26,346 36,067 Bad debt expenses (recovery), net ...... 15 — (17,873) (17,858) — — Non-cash purchase accounting (excluding depreciation and amortization) ...... (770) (217) (183) (736) 795 23,099 Transaction (income) expense, net ...... (29,006) 55 2,321 (26,740) 2,590 34,529 Adjusted EBITDA ...... 1,740,581 436,156 371,163 1,675,588 1,755,294 1,610,684
(2) Capital expenditures as shown in our cash flow statement, comprised of investments for the period in systems, equipment and other assets related to contract, property, plant and equipment, intangible assets and cost method investments. (3) Free operating cash flows reflects the impact of adopting ASU 2016-18 for all periods presented. (4) Interest expense is comprised of the interest expense due in connection with the Existing Notes and the Existing IGT HoldCo Notes and the interest expense on other financial liabilities. Other Financial Information – Net Debt
As of March 31, As of December 31, 2018 2017 2016 ($ thousands) Long-term debt, less current portion ...... 8,049,791 7,777,445 7,863,085 Current portion of long-term debt ...... — 599,114 77 Short-term borrowings ...... 44,448 — — Total Debt ...... 8,094,239 8,376,559 7,863,162 Cash and cash equivalents ...... 569,620 1,057,418 294,094 Net Debt ...... 7,524,619 7,319,141 7,569,068 Summary Pro Forma Financial Information
As of and for the trailing twelve months ended March 31, 2018 ($ thousands) Adjusted EBITDA(1) ...... 1,740,581 Pro forma cash and cash equivalents(2) ...... 555,462 Pro forma total debt(3) ...... 8,131,704 Pro forma net debt(4) ...... 7,576,242 Pro forma interest expense(5) ...... 448,063 Ratio of pro forma total debt to Adjusted EBITDA ...... 4.7x Ratio of pro forma net debt to Adjusted EBITDA ...... 4.4x Ratio of Adjusted EBITDA to pro forma interest expense ...... 3.9x ______(1) Adjusted EBITDA is defined as net income (loss) before provision for (benefit from) income taxes, non-operating expenses, depreciation, amortization, service revenue amortization, stock-based compensation expense, restructuring expense, transaction (income) expense, net, non-cash purchase accounting (excluding depreciation and amortization), impairment loss and bad debt expense (recovery), net. For a reconciliation of Adjusted EBITDA to net income, see “—Other Financial Information.” (2) Pro forma cash and cash equivalents represents cash and cash equivalents as of March 31, 2018, adjusted to show the effects of the Transactions as if the Transactions had occurred on March 31, 2018. See “Use of Proceeds” and “Capitalization.” (3) Pro forma total debt represents the principal amount of financial debt as of March 31, 2018, further adjusted for the Transactions, and assumes that €274.75 million ($337.9 million equivalent) of the 2020 4.125% Notes and €196.25 million ($241.4 million equivalent) of the 2020 4.750% Notes will be purchased pursuant to the Tender Offer, though these amounts are subject to
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change. Pro forma total debt includes $615.0 million related to the Notes (at an exchange rate of $1.23 per €1.00) as well as $7,516.7 million related to other financial liabilities that will remain outstanding following the Transactions. (4) Pro forma net debt represents pro forma total debt, less pro forma cash and cash equivalents, and assumes that €274.75 million ($337.9 million equivalent) of the 2020 4.125% Notes and €196.25 million ($241.4 million equivalent) of the 2020 4.750% Notes will be purchased pursuant to the Tender Offer, though these amounts are subject to change. Pro forma net debt has not been prepared in accordance with U.S. GAAP or any other generally accepted accounting principles and has been presented for illustrative purposes only and does not purport to represent what our net debt would have actually been had the Notes offered hereby and the Tender Offer occurred on the dates assumed, nor does it purport to project our net debt for any future period or our financial condition at any future date. Pro forma net debt is not a recognized measure of liquidity under U.S. GAAP and therefore no undue reliance should be placed on such data contained in this Offering Memorandum. See “Presentation of Financial Information—Non-U.S. GAAP Financial Measures.” (5) Pro forma interest expense is comprised of (a) the interest expense due in connection with the Existing Notes and the Existing IGT HoldCo Notes and the interest expense on other financial liabilities (assuming that €274.75 million ($337.9 million equivalent) of the 2020 4.125% Notes and €196.25 million ($241.4 million equivalent) of the 2020 4.750% Notes will be purchased pursuant to the Tender Offer, though these amounts are subject to change) and (b) the interest expense in respect of the Notes offered hereby of 3.500% applied across the full trailing twelve months ended March 31, 2018. Pro forma interest expense is calculated gross of the estimated $7.6 million debt issuance costs in connection with the Transactions.
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RISK FACTORS The risk factors included in this “Risk Factors” section are to be read in conjunction with those risk factors included in the 2017 Annual Report on Form 20-F incorporated by reference herein and are considered a part of this Offering Memorandum. We believe that the factors in this “Risk Factors” section and those contained in the 2017 Annual Report on Form 20-F may affect us in our ability to perform our obligations under the Notes and the ability of the Guarantors to perform their obligations under the Guarantees. Some of these factors are contingencies which may or may not occur and neither we nor the Guarantors are in a position to express a view on the likelihood of any such contingency occurring. In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are also described in this section and in the “Risk Factors” section of the 2017 Annual Report on Form 20-F. We believe that the factors described in this “Risk Factors” section represent the principal risks inherent in investing in the Notes, but the inability of us or the Guarantors to pay interest, principal or other amounts on or in connection with the Notes and the Guarantees may occur for other reasons which may not be considered significant risks by us and the Guarantors based on information currently available to them and which they may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Offering Memorandum and reach their own views prior to making any investment decision. Risks Relating to Internal Controls and Disclosure Controls and Procedures We previously identified a material weakness in our internal control over financial reporting and we may identify other material weaknesses in the future. In connection with the restatement of our consolidated Statement of Cash Flows for the year ended December 31, 2016 (the “2016 Statement of Cash Flows”), we identified a material weakness in our internal control over financial reporting, as we did not maintain effective internal controls related to the identification, evaluation, and documentation of significant judgments related to the classification on the 2016 Statement of Cash Flows of significant non-recurring transactions, such as the Upfront Payment. A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Management identified a material weakness in our internal control over financial reporting as we did not maintain effective internal controls related to the identification, evaluation, and documentation of significant judgments related to the classification on the 2016 Statement of Cash Flows of significant non-recurring transactions, such as the material upfront payments made in connection with the Italian Gioco del Lotto service concession. See “Presentation of Financial Information— Restatements.” During the second half of 2017 and continuing through the first quarter of 2018, management took several actions to enhance our internal control over financial reporting to identify, evaluate and document significant judgments related to the classification on our consolidated statements of cash flows of significant non-recurring transactions. Such actions included (i) expanding staffing and resources dedicated to technical accounting and financial reporting; (ii) formalization of the process to identify and document significant judgments related to the classification on the consolidated statement of cash flows of significant non-recurring transactions, and (iii) utilizing professional services from external advisers to supplement internal resources and provide us with access to additional technical resources that management uses in their evaluation of complex accounting matters related to the consolidated statement of cash flows. Although we believe these actions have enhanced our internal control over financial reporting and remediated the material weakness, we cannot assure you that we will not identify material weaknesses in the future. Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If we fail to maintain the adequacy of our internal control, including any failure to implement required new or improved control, or if we experience difficulties in its implementation, our business and financial results could be harmed and we could fail to meet our financial reporting obligations. If our remedial measures were insufficient to address the material weaknesses, or if additional material
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weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to further restate our financial results or may be unable to produce accurate and timely financial statements, which could have a material adverse effect on our business, financial condition and results of operations. See “Item 15. Controls and Procedures” of the 2017 Annual Report on Form 20-F and “Item 4. Controls and Procedures” of the Report on Form 6-K. Risks Relating to the Notes We require a significant amount of cash to service our debt and sustain our operations. Our ability to generate sufficient cash depends on many factors beyond our control. Our ability to make payments on and to refinance our debt, and to fund working capital and capital expenditures, will depend on our future operating performance and ability to generate sufficient cash. This depends, to some extent, on the success of our business strategy and on general economic, financial, competitive, market, legislative, regulatory and other factors, as well as the other factors discussed in these “Risk Factors,” and “Item 3.D.Risk Factors” of the 2017 Annual Report on Form 20-F, many of which are beyond our control. We cannot assure you that our business will generate sufficient cash flows from operations, that currently anticipated cost savings, revenue growth and operating improvements will be realized or that future debt and equity financing will be available to us in an amount sufficient to enable us to pay our debts when due, including the Notes, or to fund our other liquidity needs. If our future cash flows from operations and other capital resources (including borrowings under the Revolving Credit Facilities) are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to:
reduce or delay our business activities and capital expenditures;
sell assets;
obtain additional debt or equity capital; or
restructure or refinance all or a portion of our debt, including the Notes, on or before maturity. We cannot assure you that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. Additionally, in certain circumstances, we may not be able to draw under our Revolving Credit Facilities. Any failure to make payments on the Notes on a timely basis would likely result in a reduction of our credit rating, which could also harm our ability to incur additional indebtedness. In addition, the terms of our debt, including the Notes, the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes and the Existing IGT US HoldCo Notes, limit, and any future debt may limit, our ability to pursue any of these alternatives. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business, financial condition and results of operations. There can be no assurance that any assets which we could be required to dispose of can be sold or that, if sold, the timing of such sale and the amount of proceeds realized from such sale will be acceptable. Our debt and debt service obligations could adversely affect our business and prevent us from fulfilling our obligations with respect to the Notes and the Guarantees. We have a substantial amount of debt and significant debt service obligations. As of March 31, 2018, after giving effect to the Transactions (assuming that €274.75 million ($337.9 million equivalent) of the 2020 4.125% Notes and €196.25 million ($241.4 million equivalent) of the 2020 4.750% Notes will be purchased pursuant to the Tender Offer, though these amounts are subject to change), we would have had an aggregate of approximately $8,131.7 million of total debt, of which $8,087.3 million would be secured indebtedness. We would also have had $1,835.9 million available to draw under the Revolving Credit Facilities, which would constitute secured indebtedness. See “Capitalization,” “Summary Historical Financial Information and Other Data” and “Description of Other Indebtedness.”
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The degree to which we will remain leveraged following the offering and sale of the Notes could have important consequences to holders of Notes, including, but not limited to:
making it difficult for us to satisfy our obligations with respect to the Notes and our other debt;
increasing our vulnerability to and reducing our flexibility to respond to general adverse economic and industry conditions;
limiting our ability to raise additional debt or equity capital in the future;
requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures, or other general corporate purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the competitive environment and the industry in which we operate;
restricting us from making strategic acquisitions or exploring business opportunities; and
placing us at a competitive disadvantage as compared to our competitors, to the extent that they are not as highly leveraged. Any of these or other consequences or events could have a material adverse effect on our ability to satisfy our debt obligations, including the Notes. In addition, our debt under the Revolving Credit Facilities and the Term Loan Facility bears interest at a variable rate which is based on EURIBOR or LIBOR, as applicable, plus an agreed margin and certain additional costs (each as defined under the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement). Fluctuations in EURIBOR or LIBOR, or the occurrence of a market disruption event (as defined in the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement) may increase our overall interest burden and could have a material adverse effect on our ability to service our debt obligations. We may also be able to incur substantial additional indebtedness in the future. Although the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement contain restrictions on the incurrence of additional indebtedness by subsidiaries who are not obligors under the Revolving Credit Facilities and the Term Loan Facility and our ability to grant guarantees, these restrictions are subject to a number of significant qualifications and exceptions, and the amount of indebtedness that could be incurred in compliance with those restrictions could be substantial. In addition, the Revolving Credit Facilities and the Term Loan Facility will not prevent us from incurring obligations that do not constitute indebtedness under the Revolving Credit Facilities and the Term Loan Facility. The Indenture will not contain financial covenants or meaningful restrictions on the Issuer or the Guarantors. Neither the Issuer nor any of the Guarantors will be restricted from incurring additional debt or other liabilities under the Indenture. We may from time to time incur additional debt and other liabilities. The Indenture will not require us to achieve or maintain any minimum financial results relating to our financial condition or results of operations. In addition, we will not be restricted from paying dividends or making distributions on our capital stock or purchasing or redeeming our capital stock under the Indenture. Additionally, the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement do not contain a restriction on the incurrence of debt by the Issuer or the Guarantors. The Revolving Credit Facilities Agreement and the Term Loan Facility Agreement require us to maintain certain financial ratios. The Revolving Credit Facilities Agreement and the Term Loan Facility Agreement do not restrict us (in certain circumstances) from paying dividends or making distributions to our shareholders. We are subject to restrictions that may limit our ability to finance our future operations and capital needs and to pursue business opportunities and activities. The Revolving Credit Facilities Agreement and the Term Loan Facility Agreement contain covenants that restrict our ability to, among other things, incur certain additional indebtedness by Group members who are
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not obligors under the Revolving Credit Facilities or the Term Loan Facility, grant certain guarantees and make certain acquisitions. The Existing Indentures also limit the ability of non-Guarantor subsidiaries to incur certain additional indebtedness. In addition, Italian law (including Law No. 220 of December 13, 2010) and the terms of certain concessions, restrict the ability of certain Group members to grant guarantees. The covenants to which we are subject could limit our ability to finance our future operations and capital needs and our ability to pursue business opportunities and activities that may be in our interest. In addition, we are subject to the affirmative and financial covenants contained in the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement and are required to comply with certain financial ratios pursuant to applicable Italian law and as provided in certain of our concessions. For example, the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement require us to maintain ratios of total net debt to earnings before interest, taxes, depreciation and amortization and earnings before interest, taxes, depreciation and amortization to total net interest costs. Our ability to meet these obligations can be affected by events beyond our control, and we cannot assure you that we will meet them. A breach of any of those affirmative and financial covenants could result in an event of default under the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement. Upon the occurrence of any such event of default, subject to applicable cure periods and other limitations on acceleration or enforcement, the relevant creditors could cancel the availability of the facilities and elect to declare all amounts outstanding under the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement, together with accrued interest, immediately due and payable. In addition, any default under the Revolving Credit Facilities Agreement and the Term Loan Facility Agreement lead to an event of default and acceleration of payment of amounts outstanding under other debt instruments that contain cross-default or cross-acceleration provisions, including the Indenture, the Existing Indentures and the Existing IGT US HoldCo Indentures. We are also subject to ratios under Italian law and applicable to our concessions, pursuant to the inter-managerial decree issued by the Ministry of Economy and Finance on June 28, 2011 that includes, inter alia, a financial ratio in relation to flexibility of assets and liabilities, a ratio on financial autonomy and a ratio between consolidated net debt and net equity. Our ability to meet these financial ratios can be affected by events beyond our control, and we cannot assure you that we will meet them. A breach of the financial ratios under our Italian concessions could result in the revocation of the relevant concessions. Holders of Notes may not control certain decisions regarding the Collateral. The Notes will be secured by the same Collateral which secures our obligations under the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes and the Existing IGT US HoldCo Notes (which are required to be secured only to the extent the Collateral constitutes property or assets of IGT US HoldCo or a subsidiary of IGT US HoldCo) (together with our liabilities under the Notes, the “Initial Secured Liabilities”). In addition under the terms of the Indenture, we will be permitted to incur significant additional indebtedness and other obligations secured by the same Collateral (such indebtedness and obligations together with the Initial Secured Liabilities, the “Secured Liabilities”). Disputes may occur between the holders of Notes and the creditors of the other Secured Liabilities as to the appropriate manner of pursuing the enforcement remedies and strategies with respect to the Collateral. In such event the holders of Notes may be bound by any decision to enforce made by a group of creditors holding Secured Liabilities within a particular class or, in certain circumstances, by the holders of over 50% of the Secured Liabilities, which may result in enforcement action in respect of the Collateral, whether or not such action is approved by the holders of Notes or may be adverse to such holders. The creditors of the Secured Liabilities (other than under the Notes) may have interests that are different from the interests of holders of Notes and they may elect to pursue their remedies under the security documents at a time when it would otherwise be disadvantageous for the holders of Notes to do so. In addition, if the Security Agent sells Collateral comprising the shares of any of our subsidiaries as a result of an enforcement action in accordance with the Intercreditor Agreement, claims under the Notes and the Guarantees and the liens over any other assets securing the Notes and the Guarantees may be released. In such a situation, your ability to recover on the Notes could be materially impaired.
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Our obligations under the Notes will be secured only to the extent of the value of the Notes Collateral and the obligations of the Guarantors under the Guarantees to the extent of the value of the Guarantee Collateral that has been granted as security, and such security may not be sufficient to satisfy the obligations under the Notes or the Guarantees. In addition to the Notes, the Collateral also secures the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes, and the Existing IGT US HoldCo Notes (which are required to be secured only to the extent the Collateral constitutes property or assets of IGT US HoldCo or a subsidiary of IGT US HoldCo). There are no restrictions under the Indenture that prevent us from securing other debt with the Collateral. As of March 31, 2018, after giving effect to the Transactions, we would have had approximately $8,087.3 million of secured indebtedness. If there is an event of default under the Notes, the holders of Notes will be secured only by the Collateral. All or part of the Collateral may be released without the consent of holders of Notes under certain circumstances. See “—There are circumstances other than repayment or discharge of the Notes under which the Guarantees will be released automatically and under which the Collateral will be released automatically, without your consent or the consent of the Trustee.” There is no guarantee that the value of the Collateral currently, or subsequently, will be sufficient to enable us to perform its obligations under the Notes. There is no requirement to provide funds to enhance the value of the Collateral if it is insufficient. The proceeds of any sale or enforcement of the Collateral following an event of default with respect to the Notes may not be sufficient to satisfy, and may be substantially less than, amounts due on the Secured Liabilities, including the Notes. The amount of proceeds realized upon the enforcement of the security interests in the Collateral or in the event of liquidation will depend upon many factors, including, among others, whether or not our business is sold as a going concern, the jurisdiction in which the enforcement action or sale is completed, the ability to readily liquidate the Collateral, the availability of buyers, the condition of the market for such Collateral and exchange rates. The book value of the Collateral should not be relied on as a measure of realizable value for such assets. Portions of the Collateral may be illiquid and may have no readily ascertainable market value. No appraisal of any Collateral has been prepared in connection with the Offering. By its nature, some or all of the Collateral may not have a readily ascertainable market value or may not be saleable or, if saleable, there may be substantial delays in its disposal. To the extent that liens, security interests and other rights granted to other parties encumber assets owned by us or the Guarantors, those parties have or may exercise rights and remedies with respect to the property subject to their liens, security interests or other rights that could adversely affect the value of that Collateral and the ability of the Trustee or investors as holders of Notes to realize or enforce that Collateral. If the proceeds of any sale of Collateral are not sufficient to repay all amounts due on the Notes and the Guarantees, holders of Notes (to the extent not repaid from the proceeds of the sale of the Collateral) would have only an unsecured claim against our and the Guarantors’ remaining assets. Each of these factors or any challenge to the validity of the Collateral or the intercreditor arrangement governing our creditors’ rights could reduce the proceeds realized upon enforcement of the Collateral. In addition, there can be no assurance that the Collateral could be sold in a timely manner, if at all. Moreover, the Indenture will allow incurrence of additional debt in the future that is secured by the Collateral on a pari passu basis. To the extent that other first priority security interests, pre-existing liens, liens permitted under the Indenture and other rights encumber the Collateral securing the Notes, those parties may have or may exercise rights and remedies with respect to the Collateral that could adversely affect the value of the Collateral and the ability of the Security Agent to realize or foreclose on the Collateral. The claims of the holders of Notes will be effectively subordinated to the rights of our secured creditors to the extent the value of the assets securing such indebtedness which does not constitute Collateral. The Notes and the Guarantees will be secured within 90 days of the Issue Date by security interests in the Notes Collateral and the Guarantee Collateral, respectively. The Indenture will also provide for a restriction on the ability of us and the Guarantors to secure certain debt with assets that do not constitute the Collateral, subject to specified exceptions. The Indenture will not restrict the ability of subsidiaries which are not Guarantors to secure debt with assets that are not part of the Collateral. Additionally, the Indenture will allow us to secure indebtedness up to the greater of (i) $1.0 billion and (ii) six percent (6%) of Total Assets (as defined in the Indenture) if the Notes achieve investment grade status. In the event of any distribution or payment of our assets or property in any foreclosure, dissolution, winding-up, liquidation, administration,
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reorganization, or other insolvency or bankruptcy proceeding, the proceeds from the sale of assets securing any secured indebtedness will be available to pay obligations on the Notes only after all such secured indebtedness (including claims preferred by operation of law) has been paid in full unless such property or asset also secures the Notes on an equal and ratable basis. As a result, holders of Notes may receive less, ratably, than holders of such secured indebtedness. There are circumstances other than repayment or discharge of the Notes under which the Guarantees will be released automatically and under which the Collateral will be released automatically, without your consent or the consent of the Trustee. Under various circumstances, the Guarantees will be released automatically, including:
in connection with any sale or disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) or capital stock of that Guarantor (and that Guarantor ceases to be a subsidiary of ours), in each case to a person other than us or another Guarantor, if the sale or other disposition does not violate the provisions of the Indenture;
in accordance with an enforcement action pursuant to the provisions of the Intercreditor Agreement or any Additional Intercreditor Agreement;
with respect to the Guarantee of any Guarantor (including any Guarantor that was required to provide such Guarantee as described in the “Description of the Notes—Certain Covenants—Additional Guarantees”), upon such Guarantor being unconditionally released and discharged from its liability with respect to the indebtedness giving rise (or that would have given rise if granted subsequent to the Issue Date) to the requirement to provide such Guarantee (including, for the avoidance of doubt, any Guarantee in existence on the Issue Date);
as described under “Description of the Notes—Amendment, Supplement and Waiver;”
upon legal defeasance, covenant defeasance or satisfaction and discharge of the Indenture as provided under the captions “Description of the Notes—Legal Defeasance and Covenant Defeasance,” and “Description of the Notes—Satisfaction and Discharge;” and
upon the Notes having achieved Investment Grade Status, so long as no other indebtedness is at that time guaranteed by the relevant Guarantor in a manner that would require the granting of a Guarantee pursuant to the Indenture. In addition, under various circumstances, the Collateral will be released automatically, including:
in connection with any sale, assignment, transfer, conveyance or other disposition of such property or assets to a person that is not (either before or after giving effect to such transaction) the Issuer or a subsidiary, if the sale or other disposition does not violate the Indenture;
in connection with any sale, transfer or other disposition of capital stock of a Guarantor or any holding company of such Guarantor to a person that is not (either before or after giving effect to such transaction) the Issuer or a subsidiary, if the sale, transfer or other disposition does not violate the Indenture and the Guarantor ceases to be a Guarantor as a result of the sale, transfer or other disposition;
as described under “Description of the Notes—Amendment, Supplement and Waiver;”
upon legal defeasance, covenant defeasance or satisfaction and discharge of the Indenture as provided under the captions “Description of the Notes—Legal Defeasance and Covenant Defeasance” and “Description of the Notes—Satisfaction and Discharge;”
in accordance with the covenant described under “Description of the Notes—Certain Covenants— Impairment of Security Interests;”
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at the option of the Issuer (as confirmed in an officer’s certificate), over any intercompany loan or note to the extent that the amount outstanding under such intercompany loan or note does not exceed $10.0 million; and
in connection with a distressed disposal or an enforcement sale pursuant to the Intercreditor Agreement. See “Description of Other Indebtedness—Intercreditor Agreement” and “Description of the Notes.” Part of the Collateral is intercompany loans. The principal amount of these intercompany loans may be less than anticipated as a result of prepayments of these loans prior to the maturity date of the Notes. Certain intercompany loans or notes will be assigned or pledged to secure the Notes and the Guarantees and form part of the Collateral. Repayments prior to the maturity date of the Notes of amounts due under any of those intercompany loans or notes would result in a reduction in the principal amount of such intercompany loans or notes. We have in the past made prepayments of amounts due under our intercompany loans and notes and are not prohibited under the Indenture from making prepayments of amounts outstanding under any intercompany loans prior to the maturity date of the Notes. We cannot assure you that these amounts will not be reduced by additional payments prior to the maturity date of the Notes, which would cause a corresponding reduction in the principal amount of the any intercompany loan or note. Any reduction in the principal amount of an intercompany loan or note could reduce the value of your security on the receivables from such intercompany loan or note during the period prior to the maturity date of the Notes and potentially reduce the value of the guarantees granted by the Guarantors pursuant to the limitation applicable to any such Guarantor where the determination of the maximum guaranteed amounts under such Guarantee is based on the principal amount outstanding under such intercompany loans or notes. See “Description of the Notes—The Guarantees.” We and the Guarantors will continue to have control over the Collateral and the sale of particular assets could reduce the pool of assets securing the Notes. The security documents allow us and the Guarantors to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from the Collateral. So long as no default or event of default under the Indenture would result therefrom, we and the Guarantors may, among other things, without any release or consent by the Security Agent, conduct ordinary course activities with respect to the Collateral, such as making ordinary course cash payments, including repayments of indebtedness or exercise voting rights in respect of pledges of shares and quotas. It may be difficult to realize the value of the Collateral securing the Notes and the Guarantees. The Collateral is subject to any and all exceptions, defects, encumbrances, liens and other imperfections permitted under the Indenture or the Intercreditor Agreement and accepted by other creditors that have the benefit of first-priority security interests in the Collateral from time-to-time, whether on or after the date the Notes are first issued. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Collateral, as well as the ability of the Security Agent to realize or foreclose on such Collateral. Furthermore, the first-priority ranking of security interests can be affected by a variety of factors, including, among others, the timely satisfaction of perfection requirements, statutory liens or re-characterization under the laws of certain jurisdictions. The security interests of the Security Agent will be subject to practical problems generally associated with the realization of security interests over real or personal property such as the Collateral. For example, the Security Agent may need to obtain the consent of a third party, including governmental authorities and regulators, to enforce a security interest. We cannot assure you that the Security Agent will be able to obtain any such consents. We also cannot assure you that the consents of any third parties will be given when required to facilitate a foreclosure on such assets. Accordingly, the Security Agent may not have the ability to enforce immediately, and the value of the Collateral may significantly decrease in the meantime. In addition, we are required to register our various operations with national regulators and certain of our concessions include change of control provisions. Such requirements may prohibit foreclosure on our share capital or may require us to incur significant cost and expense due to such requirements. Furthermore, there can be no assurance that any applicable governmental authorities or regulators will consent to such action. If
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any regulatory approvals that are required are not obtained or are delayed, the foreclosure may be impracticable or delayed, a temporary shutdown of operations may result or our concessions may be revoked and the value of the Collateral may be significantly decreased or fully impaired. The security interests in the Collateral will be granted to the Security Agent rather than directly to the holders of Notes. The ability of the Security Agent to enforce certain of the security interests may be restricted by local law. The security interests in the Collateral that will secure our obligations under the Notes and the Guarantees will not be granted directly to the holders of Notes but will be granted only in favor of the Security Agent or the Trustee acting through the Security Agent. The Indenture provides (along with the Intercreditor Agreement) that only the Security Agent has the right to enforce the security documents. As a consequence, holders of Notes will not have direct security interests and will not be entitled to take enforcement action in respect of the collateral securing the Notes, except through the Trustee, who will (subject to the provisions of the Indenture) provide instructions to the Security Agent in respect of the Collateral. In addition, under the law of certain jurisdictions, including Italy, it is uncertain whether security can be created and perfected (i) in favor of creditors (such as the holders of Notes) which are neither direct parties to the relevant security documents, nor are specifically identified therein or in the relevant share certificates and corporate documents or public registries and (ii) in favor of the Trustee, since there is no established concept of “trust” or “trustee” under the laws of such jurisdictions and the precise nature, effect and enforceability of the duties, rights and powers of the Trustee as agent or trustee for holders of Notes on the secured assets located in such jurisdictions is debatable under the relevant applicable laws. To address the above potential issues, the Intercreditor Agreement provides for the creation of a parallel debt structure. Where a parallel debt structure is used, the security interests will not be granted directly to the holders of Notes but only in favor of the Security Agent, as beneficiary of parallel debt obligations (the “Parallel Debt”). The Parallel Debt is in the same amount and payable at the same time as our and the Guarantors’ obligations under the Indenture, the Notes and the Guarantees (the “Principal Obligations”). Any payment in respect of the Principal Obligations will discharge the corresponding Parallel Debt and any payment in respect of the Parallel Debt will discharge the corresponding Principal Obligations. Although the Security Agent will have, pursuant to the Parallel Debt, a claim against us and the Guarantors for the full principal amount of the Notes and the Guarantees (subject to any restrictions thereunder), holders of Notes bear some risks associated with a possible insolvency or bankruptcy of the Security Agent. The Parallel Debt obligations referred to above are contained in the Intercreditor Agreement and the Indenture, which are governed by English and New York law, respectively. There is no assurance that such a structure will be effective before the courts in the jurisdictions where Parallel Debt structures are purported to be utilized, including Italy, as there is no judicial or other guidance as to its validity or efficacy, and therefore the ability of the Security Agent to enforce the Collateral may be restricted or fully impaired. In addition, the registration of Collateral (if required) may be rejected if the relevant registrar considers that the structure is not valid or enforceable or the security interests may become unenforceable if the relevant court disregards the Parallel Debt structure. See “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests.” The granting of the security interests in connection with the Notes and the Guarantees, or the incurrence of permitted debt in the future, may create or restart hardening periods for such security interests in accordance with the laws applicable in certain jurisdictions. The granting of security interests to secure the Notes and the Guarantees may create hardening periods for such security interests in certain jurisdictions, including Italy, and the relevant regime for hardening periods may be less favorable if the secured debt (or part thereof) is pre-existing to the granting of the security interest. In addition, the granting of shared security interests to secure future permitted debt may restart or reopen such hardening periods, as the Indenture permits the release and retaking of security granted in favor of the Notes and the Guarantees in certain circumstances including in connection with the incurrence of future debt. Moreover, the applicable hardening period for these new security interests can run from the moment each new security interest has been granted, perfected, extended or recreated including as a consequence of an extension of a pre-existing security to secure future debt in those jurisdictions, including Italy, where a security cannot secure future debt. At each time, if the security interest granted, perfected or recreated were to be enforced before the end of the respective hardening period applicable in the relevant jurisdiction, it may be
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declared void or ineffective or it may not be possible to enforce it. See “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests.” The same issues also apply in connection with the accession of additional Guarantors and the granting of security interest over their relevant assets for the benefit of holders of Notes. See “Description of the Notes— Security.” The Notes will initially be held in Book-Entry form, and therefore you must rely on the procedure of the relevant clearing system to exercise any rights and remedies. Owners of the Book-Entry interests will not be considered owners or holders of Notes unless and until definitive notes are issued in exchange for Book-Entry interests. Instead, the common depositary (or its nominee) for Euroclear and Clearstream will be the sole registered holder of Notes in global form. Payments of principal, interest and other amounts owing on or in respect of the Notes in global form will be made to the Paying Agent, which will make payments to Euroclear and Clearstream. Thereafter, such payments will be credited to Euroclear and Clearstream participants’ accounts that hold Book-Entry interests in the Notes in global form and credited by such participants to indirect participants. After payment to the common depositary for Euroclear and Clearstream, none of us, the Guarantors, the Trustee or any paying agent will have any responsibility or liability for any aspect of the records relating to or payments of interest, principal or other amounts to Euroclear and Clearstream, or to owners of Book-Entry interests. Accordingly, if you own a Book-Entry interest in the Notes, you must rely on the procedures of Euroclear and Clearstream and, if you are not a participant in Euroclear or Clearstream, on the procedures of the participant through which you own your interest, to exercise any rights and obligations of a holder of Notes under the Indenture. Owners of Book-Entry interests will not have the direct right to act upon our solicitations for consents or requests for waivers or other actions from holders of Notes, including enforcement of security for the Notes and the Guarantees. Instead, if you own a Book-Entry interest, you will be reliant on the common depositary (as registered holder of Notes) to act on your instructions or be permitted to act directly only to the extent you have received appropriate proxies to do so from Euroclear and Clearstream or, if applicable, from a participant. We cannot assure you that procedures implemented for the granting of such proxies will be sufficient to enable you to vote on any requested actions or to take any other action on a timely basis. There may not be an active trading market for the Notes, in which case your ability to sell the Notes may be limited. We cannot assure you as to:
the liquidity of any market in the Notes;
your ability to sell your Notes; or
the prices at which you would be able to sell your Notes. Future trading prices for the Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. Historically, the market for non-investment grade securities has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Notes. The liquidity of a trading market for the Notes may be adversely affected by a general decline in the market for similar securities and is subject to disruptions that may cause volatility in prices. The trading market for the Notes may attract different investors and this may affect the extent to which the Notes may trade. It is possible that the market for the Notes will be subject to disruptions. Any such disruption may have a negative effect on you, as a holder of Notes, regardless of our prospects and financial performance. As a result, there is no assurance that there will be an active trading market for the Notes. If no active trading market develops, you may not be able to resell your holding of the Notes at a fair value, if at all. Although an application has been made for the Notes to be listed on the Official List of Euronext Dublin and to be admitted to trading on the Global Exchange Market of Euronext Dublin, we cannot assure you that such application will be accepted or that the Notes will remain listed or admitted. No assurance is made as to the liquidity of the Notes as a result of the admission to trading on the Global Exchange Market. Failure of the
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Notes to be approved for inclusion on or the removal (whether or not for an alternative admission to listing on another stock exchange) of the Notes from the Official List may have a material effect on a holder’s ability to resell the Notes in the secondary market. The Indenture will allow us to issue additional notes in the future, which could adversely impact the liquidity of the Notes. We do not present separate financial statements for each Guarantor and, as a result, our consolidated financial information may be of limited use in assessing the financial position of the Guarantors. For the three months ended March 31, 2018, the Issuer and the Guarantors collectively represented 43% ($513 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, the Issuer and the Guarantors collectively represented 30% ($528 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the Issuer and the Guarantors collectively represented 196% ($4,542 million) of the Group’s net assets. For the year ended December 31, 2017, the Issuer and the Guarantors collectively represented 43% ($2,130 million) of the Group’s consolidated total revenue and 31% ($514 million) of the Group’s consolidated Adjusted EBITDA. As of December 31, 2017, the Issuer and the Guarantors collectively represented 201% ($4,724 million) of the Group’s net assets. We have not presented in this Offering Memorandum separate financial statements for each Guarantor and we are not required to do so in the future under the Indenture. Accordingly, our consolidated financial information may be of limited use in assessing the financial position of the Guarantors. Non-Guarantor subsidiaries account for a significant portion of our Adjusted EBITDA and net assets. For the three months ended March 31, 2018, the non-Guarantor subsidiaries collectively represented 57% ($693 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, the non-Guarantor subsidiaries represented 70% ($1,212 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the non-Guarantor subsidiaries represented (96)% ($(2,223) million) of the Group’s net assets. For the year ended December 31, 2017, the non-Guarantor subsidiaries collectively represented 57% ($2,809 million) of the Group’s consolidated total revenue and 69% ($1,162 million) in consolidated Adjusted EBITDA. As of December 31, 2017, the non-Guarantor subsidiaries collectively represented (101)% ($(2,369) million) of the Group’s net assets. A number of our present and future subsidiaries will not guarantee the Notes under the Indenture, and will, therefore, not be subject to all of the restrictive covenants thereunder. Subsidiaries that are not Guarantors account for a significant portion of our revenues, Adjusted EBITDA and net assets. For so long as, and to the extent that, such subsidiaries are not Guarantors, certain of the restrictive covenants contained in the Indenture will not apply to such subsidiaries. However, under the Indenture subsidiaries which are not Guarantors may only incur indebtedness up to the greater of (i) $1.0 billion and (ii) six percent (6%) of Total Assets (as defined in the Indenture). The Notes are structurally subordinated to the liabilities of non-Guarantor subsidiaries. Some, but not all, of our subsidiaries will guarantee the Notes. Unless a subsidiary is a Guarantor, such subsidiary will not have any obligations to pay amounts due under the Notes or to make funds available for that purpose. Generally, holders of indebtedness of, and trade creditors of, non-Guarantor subsidiaries, including lenders under bank financing agreements, are entitled to payments of their claims from the assets of such subsidiaries before these assets are made available for distribution to the Issuer or any Guarantor, as a direct or indirect shareholder. Accordingly, in the event that any non-Guarantor subsidiary becomes insolvent, is liquidated, reorganized or dissolved or is otherwise wound up other than as part of a solvent transaction:
the creditors of the Issuer (including the holders of Notes) and the Guarantors will have no right to proceed against the assets of such subsidiary; and
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creditors of such subsidiary, including trade creditors, will generally be entitled to payment in full from the sale or other disposal of the assets of such subsidiary before the Issuer or any Guarantor, as a direct or indirect shareholder, will be entitled to receive any distributions from such subsidiary. As such, the Notes and each Guarantee will be structurally subordinated to the creditors (including trade creditors) and any preferred stockholders of our non-Guarantor subsidiaries. Moreover, the Italian Guarantor is providing a guarantee subject to limitations due to restrictions under Italian law (including Law No. 220 of December 13, 2010) and under certain concessions. However, subject to the restrictions set out in the Indenture, the Italian Guarantor may generally incur debt which is functional to the operation of its concessions. The non-Guarantor subsidiaries have no material third party funded indebtedness but have trade payables and tax liabilities to which the Notes and the Guarantees are structurally subordinated. See “Description of Other Indebtedness.” We may not be able to obtain the funds required to repurchase the Notes upon a change of control. The Indenture contains provisions relating to certain events constituting a “change of control” of the Issuer. Upon the occurrence of a change of control, we will be required to offer to repurchase all outstanding Notes at a price equal to 101% of their principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the date of repurchase. If a change of control were to occur, we cannot assure you (i) that we would have sufficient funds available at such time to pay, or to raise the funds to pay, the purchase price of the outstanding Notes, or (ii) that the restrictions in our Revolving Credit Facilities Agreement, the Term Loan Facility Agreement, the Existing Indentures, the Existing IGT US HoldCo Indentures, the Intercreditor Agreement or our other then-existing contractual obligations would allow us to make, or raise the funds to make, such required repurchases. A change of control may result in an event of default under, or acceleration of, other indebtedness, may result in an obligation to prepay all or part of the indebtedness outstanding under our Revolving Credit Facilities, the Term Loan Facility, the Existing Notes, and the Existing IGT US HoldCo Notes and our ability to receive cash from our subsidiaries to allow us to pay cash to the holders of Notes following the occurrence of a change of control, may be limited by our then existing financial resources. In addition, we expect that we would require third-party financing to make an offer to repurchase the Notes upon a change of control. We cannot assure you that we would be able to obtain such financing. Any failure by the Issuer to offer to purchase the Notes would constitute a default under the Indenture which would, in turn, constitute a default under the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes, and the Existing IGT US HoldCo Notes. See “Description of the Notes—Change of Control.” The change of control provision contained in the Indenture may not necessarily afford you protection in the event of certain important corporate events, including a reorganization, restructuring, merger or other similar transaction involving us that may adversely affect you, because such corporate events may not involve a change in voting power or beneficial ownership or, even if they do, may not constitute a “Change of Control” as defined in the Indenture. Except as described under “Description of the Notes—Change of Control,” the Indenture does not contain provisions that would require the Issuer to offer to repurchase or redeem the Notes in the event of a reorganization, restructuring, merger, recapitalization or similar transaction. The definition of “Change of Control” in the Indenture includes a disposition of all or substantially all of the assets of the Issuer and its restricted subsidiaries, taken as a whole, to any person. Although there is a limited body of case law interpreting the phrase “all or substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances, there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the Issuer’s assets and its restricted subsidiaries taken as a whole. As a result, it may be unclear as to whether a change of control has occurred and whether the Issuer is required to make an offer to repurchase the Notes. The insolvency laws of England and Wales, Italy and other jurisdictions may provide you with less protection than U.S. bankruptcy law. We are incorporated under the laws of England and Wales. Accordingly, insolvency proceedings with respect to us may proceed under, and be governed by, English insolvency law. The Italian Guarantor is incorporated under the laws of Italy. Accordingly, insolvency proceedings with respect to the Italian Guarantor would likely proceed under, and be governed by, the laws of Italy. Insolvency laws of other jurisdictions may not be
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as favorable to investors as the laws of the United States. As a consequence, enforcement of rights under the Notes, the Collateral and the Guarantees in an insolvency situation will be subject to the applicable rules of such jurisdictions and may be delayed and be complex and costly for creditors. In the event that any one or more of we or the Guarantors experiences financial difficulty, it is not possible to predict with certainty the outcome of insolvency or similar proceedings. In the event that any one or more of we, the Guarantors, future Guarantors, if any, or any other of our subsidiaries experience financial difficulty, it is not possible to predict with certainty in which jurisdiction or jurisdictions insolvency or similar proceedings would be commenced, or the outcome of such proceedings. Guarantees and collateral provided by entities incorporated or organized under the laws of jurisdictions not discussed in this Offering Memorandum are also subject to material limitations pursuant to their terms, by statute or otherwise. Any enforcement of the Guarantees or security after bankruptcy or an insolvency event in such other jurisdictions will be subject to the insolvency laws of the relevant entity’s jurisdiction of organization or other jurisdictions. The insolvency and other laws of each of these jurisdictions may be materially different from, or in conflict with, each other, including in the areas of rights of secured and other creditors, the ability to void preferential transfer, priority of governmental and other creditors, ability to obtain post-petition interest and duration of the proceeding. The application of these laws, or any conflict among them, could call into question whether any particular jurisdiction’s laws should apply, adversely affect your ability to enforce your rights under the Guarantees or the Collateral in these jurisdictions and limit any amounts that you may receive. See “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests.” The Guarantees and the security interests in the Collateral are subject to certain limitations on enforcement and may be limited by applicable laws or subject to certain defenses that may limit their validity and enforceability. Each Guarantee provides the relevant holders of Notes with a direct claim against the relevant Guarantor. However, the Indenture provides that each Guarantee is limited to the maximum amount that can be guaranteed by the relevant Guarantor without rendering the relevant Guarantee, as it relates to that Guarantor, voidable or otherwise ineffective or limited under applicable law, and enforcement of each Guarantee would be subject to certain generally available defenses. In addition, the ability of the Security Agent to enforce the security interests in the Collateral may be limited by mandatory provisions of each relevant jurisdiction (including applicable gaming laws, rules and regulations) and the enforcement of the security interests in the Collateral may be subject to certain statutory limitations and defenses or to limitations indicated in the security documents and designed to ensure compliance with applicable statutory requirements. Also in case of an insolvency proceeding, the Collateral will be subject to the rules of such proceedings and could be subject to potential challenges by an insolvency receiver or by other creditors pursuant to the avoidance rules and claw-back actions set forth by the local insolvency laws. As described under “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests,” guarantees in certain jurisdictions are limited by corporate benefit, fraudulent conveyance and other protections. For example, the guarantee of the Italian Guarantor will be limited to a maximum amount equal to the aggregate of (i) the outstanding principal amount drawn by the Italian Guarantor (or any of its subsidiaries) as borrower under the Revolving Credit Facilities and the Term Loan Facility (and any refinancing thereof) and (ii) the outstanding principal amount of certain intercompany loans received by the Italian Guarantor (or any of its subsidiaries) or thereafter advanced to it or its subsidiaries. Additional guarantees with equivalent limitations have been and may in the future be granted by the Italian Guarantor to support other indebtedness of us and our subsidiaries, including indebtedness under the Revolving Credit Facilities, the Term Loan Facility, the Existing Notes and the Existing IGT US HoldCo Notes. As a result, it is expected that under the terms of each guarantee, each creditor or class of creditors, including the holders of Notes, will only be capable of enforcing its guarantee on a pro rata basis, according to the proportion that the aggregate amount of the liabilities owed to such creditor or class of creditors bears to the amount of all outstanding liabilities guaranteed by the guarantees granted by the Italian Guarantor. The other creditors or class of creditors, including the lenders under the Revolving Credit Facilities and the Term Loan Facility agreed to this pro rata treatment when they entered into the Intercreditor Agreement, the security documents and the applicable accession documents at the time of offering and sale of the Notes. However, failure by any creditors or class of creditors to agree on such pro rata treatment would result in such creditors or class of creditors being capable of claiming or receiving up to the full maximum amount (and not only their pro rata
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share) of their guarantee claim, to the detriment of other creditors, including the holders of Notes. We can provide no assurance that such creditors will agree to such pro rata treatment. Enforcement of any of the Guarantees against any Guarantor is subject to certain defenses available to Guarantors in the relevant jurisdiction. Although laws differ among these jurisdictions, these laws and defenses generally include those that relate to corporate purpose or benefit, fraudulent conveyance or transfer, voidable preference, insolvency or bankruptcy challenges, financial assistance, preservation of share capital, thin capitalization, capital maintenance or similar laws, regulations or defenses affecting the rights of creditors generally. If one or more of these laws and defenses are applicable, a Guarantor may have no liability or decreased liability under its Guarantee depending on the amounts of its other obligations and applicable law. In addition, claims of certain categories of creditors may be given statutory priority in relation to the proceeds of a debtor’s property in respect to the claims of other creditors, even if such claims are secured claims. For a more detailed description of various limitations on the security under the relevant local laws (including certain insolvency law considerations), see “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests.” Although laws differ among various jurisdictions, in general, under bankruptcy or insolvency law and other laws (including corporate law), a court could (i) avoid or invalidate all or a portion of a Guarantor’s obligations under its Guarantee or of a pledging, granting or assigning entity with respect to Collateral, (ii) direct that the holders of Notes return any amounts paid under a Guarantee to the relevant Guarantor or to a fund for the benefit of the Guarantor’s creditors or (iii) take other action that is detrimental to you, typically if the court found that:
the relevant Guarantee was incurred or the security granted with actual intent to give preference to one creditor over another, hinder, delay or defraud creditors of the Guarantor or the pledging party or, in certain jurisdictions, when the granting of the Guarantee or the security has the effect of giving a creditor a preference or when the recipient was aware that the Guarantor or the pledging entity was insolvent when it granted the relevant Guarantee or security;
the Guarantor or the pledging entity did not receive fair consideration or reasonably equivalent value or corporate benefit for the relevant Guarantee or security and the Guarantor or the pledging entity was: (i) insolvent or rendered insolvent because of the relevant Guarantee or security; (ii) undercapitalized or became undercapitalized because of the relevant Guarantee or security; or (iii) intended to incur, or believed that it would incur, indebtedness beyond its ability to pay at maturity;
the relevant Guarantee or security was held to exceed the corporate objects of the Guarantor or the pledging entity or not to be in the best interests or for the corporate benefit of the Guarantor or the pledging entity; or
the amount paid or payable under the relevant Guarantee or security was in excess of the maximum amount permitted under applicable law. These or similar laws may also apply to any future guarantee granted by any of our subsidiaries pursuant to the Indenture. We cannot assure you which standard a court would apply in determining whether a Guarantor or a pledging entity was “insolvent” at the relevant time or was rendered insolvent because of the relevant Guarantee or security or that, regardless of method of valuation, a court would not determine that a Guarantor or a pledging entity was insolvent on that date, or that a court would not determine, regardless of whether or not a Guarantor or a pledging entity was insolvent on the date its Guarantee or security was issued, that payments to holders of Notes constituted preferences, fraudulent transfers or conveyances on other grounds. The liability of each Guarantor or pledging entity under its Guarantee or security is limited to the amount that will result in such Guarantee or security not constituting a preference, fraudulent conveyance or improper corporate distribution or otherwise being set aside. There can be no assurance as to what standard a court will apply in making a determination of the maximum liability of each Guarantor or pledging entity. There is a
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possibility that the entire Guarantee or security may be set aside, in which case the entire liability may be extinguished. If a court decided that a Guarantee or security was a preference, fraudulent transfer or conveyance and voided such Guarantee or security, or held it unenforceable for any other reason, you may cease to have any claim in respect of the relevant Guarantor or pledging entity and would be a creditor solely of the Issuer and, if applicable, of any other Guarantor under the relevant Guarantee or pledging entity under the relevant security which has not been declared void. In the event that any Guarantee or security is invalid or unenforceable, in whole or in part, or to the extent the agreed limitation of the Guarantee or security obligations apply, the Notes would be effectively subordinated to all liabilities of the applicable Guarantor or pledging entity, and if we cannot satisfy our obligations under the Notes or any Guarantee or security is found to be a preference, fraudulent transfer or conveyance or is otherwise set aside, we cannot assure you that we can ever repay in full any amounts outstanding under the Notes. Our rights to receive payments under any intercompany loans may be subordinated by law to the obligations of other creditors. Italian corporate law (Articles 2497-quinquies and 2467 of the Italian Civil Code) provides for rules to protect creditors against “undercapitalized companies” and provides for remedies in respect thereof. In this respect, in case of a loan to a company made by (i) a person that, directly or indirectly, directs the company or exercises management and coordination powers over that borrowing company or (ii) any entity subject to the management and coordination powers of the same person or (iii) a quotaholder in the case of a company incorporated in Italy as a società a responsabilità limitata, will be subordinated to all other creditors of that borrower and rank senior only to the equity in that borrower, if the loan is made when, taking into account the kind of business of the borrower, there was an excessive imbalance of the borrower’s indebtedness compared to its net assets or the borrower was already in a financial situation requiring an injection of equity and not a loan (“undercapitalization”). Any payment made by the borrower with respect to any such loan within one year prior to a bankruptcy declaration would be required to be returned to the borrower. The above rules apply to shareholders’ loans “made in any form” and scholars generally conclude that such provisions should be interpreted broadly and apply to any form of financial support provided to a company by its shareholders, either directly or indirectly. As of the date hereof, there are few court precedents interpreting the provisions summarized above and limited guidance has been provided so far by the courts on the specific features and extent of the undercapitalization requirement. Some of such precedents have, however, held that Article 2467 of the Italian Civil Code also applies to companies incorporated as società per azioni, hence potentially to the borrowers under the intercompany loans that are a società per azioni. Furthermore, certain Italian subsidiaries are subject to direction and coordination exercised by us. Therefore, upon the occurrence of the circumstances provided for by the relevant provisions of the Italian Civil Code, an Italian court may conclude that the obligations of any Italian subsidiary under an intercompany loan or note with respect to which such Italian subsidiary is the debtor are subordinated to all of its obligations to other creditors and senior only to equity. If an Italian court so concludes, we may not be able to recover any amounts under such intercompany loans and notes, which could have a material adverse effect on our ability to meet our payment obligations under the Notes. Moreover, if the obligations of an Italian subsidiary under any intercompany loans or notes is subordinated by operation of law, the ability of the holders of Notes to recover under any security interest in such intercompany loans or notes may be impaired or restricted. You may be unable to recover in civil proceedings for U.S. securities laws violations. The Issuer is incorporated under the laws of England and Wales, the Italian Guarantor is organized under the laws of Italy and several of the other Guarantors are not incorporated or organized under the laws of states of the United States. It is anticipated that substantially all of our directors and executive officers and some of the directors and officers of the Guarantors will not be residents of the United States and that some of their assets will be located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us, the Guarantors or our or their respective directors and executive officers, or to enforce any judgments obtained in U.S. courts predicated upon civil liability provisions of the U.S. securities laws. In addition, neither we nor the Guarantors assure you that civil liabilities predicated upon the federal securities laws of the United States will be enforceable in any of the above-mentioned
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jurisdictions, other than the United States. See “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests.” Credit ratings may not reflect all risks, are not recommendations to buy or hold securities and may be subject to revision, suspension or withdrawal at any time. One or more independent credit rating agencies may assign credit ratings to the Notes. The credit ratings address our ability to perform our obligations under the terms of the Notes and credit risks in determining the likelihood that payments will be made when due under the Notes. The ratings may not reflect the potential impact of all risks related to the structure, market, additional risk factors discussed above and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal by the rating agency at any time. No assurance can be given that a credit rating will remain constant for any given period of time or that a credit rating will not be lowered or withdrawn entirely by the credit rating agency if, in its judgment, circumstances in the future so warrant. A suspension, reduction or withdrawal at any time of the credit rating assigned to the Notes by one or more of the credit rating agencies may adversely affect the cost and terms and conditions of our financings and could adversely affect the value and trading of the Notes. The transferability of the Notes may be limited under applicable securities laws. The Notes and the Guarantees have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state or any other jurisdiction and, unless so registered, may not be offered or sold in the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and the applicable securities laws of any state or any other jurisdiction. See “Notice to Investors.” It is the obligation of holders of Notes to ensure that their offers and sales of the Notes within the United States and other countries comply with applicable securities laws. The Notes may be issued with original issue discount for U.S. federal income tax purposes. The Notes may be issued with original issue discount (OID) for U.S. federal income tax purposes. If the stated principal amount of the Notes exceeds their “issue price” by an amount equal to or more than a statutorily defined de minimis amount, the Notes will be treated as issued with OID for U.S. federal income tax purposes. In such case U.S. holders, whether on the cash or accrual method of tax accounting, would be required to include any amounts representing OID in gross income (as ordinary income) as it accrues on a constant yield to maturity basis for U.S. federal income tax purposes in advance of the receipt of cash payments to which such OID is attributable. For more information, see “Tax Considerations—Certain U.S. Federal Income Tax Considerations.”
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USE OF PROCEEDS We expect that the gross proceeds from the Offering will be equivalent to approximately €500.0 million ($615.0 million equivalent calculated at an exchange rate of $1.23 per €1.00). We expect to use the proceeds to: (i) pay for the Target Notes in connection with the Tender Offer; and (ii) pay certain fees and expenses in connection with the Transactions. If the net proceeds of the Offering exceed the amount we spend in connection with the Tender Offer, then we will use the excess for other corporate purposes, including potentially purchasing or redeeming certain of the Existing Notes other than the Target Notes. See “Capitalization.” The following table outlines the anticipated sources and uses of funds in connection with the Offering. The amounts shown in the table are estimates. Actual amounts will vary from the estimated amounts depending on several factors, including estimated costs, fees and expenses.
Sources ($ millions) Uses ($ millions) The Notes(1) ...... 615.0 The Target Notes (principal)(2) ...... 579.3 Cash on hand ...... 14.2 The Target Notes (premium)(2) ...... 33.8 Accrued interest(3) ...... 8.7 Estimated fees and expenses ...... 7.3 Total sources ...... 629.2 Total uses ...... 629.2 ______(1) €500.0 million of Notes converted at an exchange rate of $1.23 per €1.00. (2) Based on a hypothetical scenario in which €274.75 million ($337.9 million equivalent) of the 2020 4.125% Notes and €196.25 million ($241.4 million equivalent) of the 2020 4.750% Notes will be purchased pursuant to the Tender Offer, though these amounts are subject to change. The tender offer consideration for each €1,000.00 principal amount of the 2020 4.125% Notes accepted for purchase pursuant to the Tender Offer will be €1,050.00 ($1,291.50 equivalent) and the tender offer consideration for each €1,000.00 principal amount of the 2020 4.750% Notes accepted for purchase pursuant to the Tender Offer will be €1,070.00 ($1,316.10 equivalent). This figure is presented for illustrative purposes only and calculated on the basis of a hypothetical scenario regarding the amounts purchased in the Tender Offer and other factors. Such hypothetical scenario reflects only one possible future scenario, and for that reason it should not be considered as an expression of any expectation or prediction of the results of the Tender Offer. The actual results of the Tender Offer may vary significantly from such hypothetical scenario, and therefore information regarding (i) the amount of proceeds to be used to redeem any Target Notes accepted for purchase pursuant to the Tender Offer, pay accrued interest or pay the estimated fees and expenses for the Transactions or (ii) the amount of cash used for any of the foregoing purposes, is subject to change, and such change could be material. (3) Based on the anticipated Issue Date. Holders whose Target Notes are accepted for purchase in the Tender Offer will also be paid a cash amount in euros equal to the accrued and unpaid interest on the Target Notes from and including the immediately preceding interest payment date up to, but excluding, the settlement date of the Tender Offer.
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CAPITALIZATION The following table sets forth our capitalization as of March 31, 2018 on an actual basis and as adjusted to reflect the offering and sale of the Notes and the use of the proceeds therefrom. You should read the following table in conjunction with the Interim Financial Statements and the sections of this Offering Memorandum entitled “Presentation of Financial Information,” “Risk Factors,” “Use of Proceeds,” and “Summary Historical Financial Information and Other Data.”
As of March 31, 2018 Actual Adjusted ($ thousands) Cash and cash equivalents ...... 569,620 555,462 (1)(2)(3) Long term debt, less current portion(4) ...... 8,049,791 8,087,256 (1) Of which the principal of the Notes ...... — 615,000 (5) Short-term borrowings ...... 44,448 44,448 Total debt(6) ...... 8,094,239 8,131,704 Other liabilities(7) ...... 3,914,133 3,911,570 Redeemable non-controlling interests ...... 377,243 377,243 Total shareholders’ equity ...... 2,319,292 2,270,233 Total liabilities, redeemable non-controlling interests and shareholders’ equity ...... 14,704,907 14,690,750 ______(1) Based on a hypothetical scenario in which €274.75 million ($337.9 million equivalent) of the 2020 4.125% Notes and €196.25 million ($241.4 million equivalent) of the 2020 4.750% Notes will be purchased pursuant to the Tender Offer, though these amounts are subject to change. The tender offer consideration for each €1,000.00 principal amount of the 2020 4.125% Notes accepted for purchase pursuant to the Tender Offer will be €1,050.00 ($1,291.50 equivalent) and the tender offer consideration for each €1,000.00 principal amount of the 2020 4.750% Notes accepted for purchase pursuant to the Tender Offer will be €1,070.00 ($1,316.10 equivalent). (2) Holders whose Target Notes are accepted for purchase in the Tender Offer will also be paid a cash amount in euros equal to the accrued and unpaid interest on the Target Notes from and including the immediately preceding interest payment date up to, but excluding, the settlement date of the Tender Offer. (3) Presented for illustrative purposes only and calculated on the basis of a hypothetical scenario regarding the amounts purchased in the Tender Offer and other factors. Such hypothetical scenario reflects only one possible future scenario, and for that reason it should not be considered as an expression of any expectation or prediction of the results of the Tender Offer. The actual results of the Tender Offer may vary significantly from such hypothetical scenario, and therefore information regarding (i) the amount of proceeds to be used to redeem any Target Notes accepted for purchase pursuant to the Tender Offer, pay accrued interest or pay the estimated fees and expenses for the Transactions or (ii) the amount of cash used for any of the foregoing purposes, is subject to change, and such change could be material. The Issuer may, in its discretion, choose to accept different amounts of the Target Notes, and may pro-rate such accepted amounts differently, and therefore such hypothetical scenario should not be interpreted as an expression of the Issuer’s intention with respect to the proportions of Target Notes to be accepted in the Tender Offer. (4) Presented for illustrative purposes only and calculated on the basis of adjustments for changes in the principal amount of long term debt and premiums paid in connection with the Tender Offer, and has been further adjusted for estimated debt issuance costs (net) incurred in connection with the Offering. (5) Consists €500.0 million of Notes ($615.0 million at an exchange rate of $1.23 per €1.00). (6) Total debt includes amounts drawn under the Revolving Credit Facilities and the Term Loan Facility and the Notes, the Existing Notes and the Existing IGT HoldCo Notes, as well as other items presented under the financial statements included elsewhere in this Offering Memorandum. (7) Other liabilities includes accounts payable, other current liabilities, income taxes payable, deferred income taxes and other non-current liabilities.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We have incorporated by reference herein the 2017 Annual Report on Form 20-F. “Item 5. Operating and Financial Review and Prospects” of the 2017 Annual Report on Form 20-F contains a discussion and analysis of our financial condition and results of operations for the years ended December 31, 2017, 2016 and 2015 as derived from the Annual Financial Statements and the requirements for Form 20-F set forth by the SEC. Other items in the 2017 Annual Report on Form 20-F provide further information and explanations that should be read in conjunction with such discussion and analysis. Accordingly, we disclose important information to you for purposes of this Offering Memorandum by referring you to the 2017 Annual Report on Form 20-F. See “Incorporation by Reference”. We have also incorporated by reference herein the Report on Form 6-K. “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Report on Form 6-K contains a discussion and analysis of our financial condition and results of operations for the three-month periods ended March 31, 2018 and 2017 as derived from the Interim Financial Statements and the applicable requirements of the SEC for Form 6-K. Other items in the Report on Form 6-K provide further information and explanations that should be read in conjunction with such discussion and analysis. Accordingly, we disclose important information to you for purposes of this Offering Memorandum by referring you to the Report on Form 6-K. See “Incorporation by Reference”.
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DESCRIPTION OF OTHER INDEBTEDNESS The following is a summary of the material terms of our principal additional indebtedness in addition to the Notes after giving effect to the Transactions. The following summaries do not purport to describe all of the applicable terms and conditions of such arrangements and are qualified in their entirety by reference to the actual agreements. Capitalized terms used in the following summaries and not otherwise defined in this Offering Memorandum have the meanings ascribed to them in their respective agreements. Revolving Credit Facilities Agreement On November 4, 2014, the Issuer, as the Parent and a Borrower; IGT Global Solutions Corporation, as a Borrower; J.P Morgan Limited and Mediobanca — Banca di Credito Finanziario S.p.A., as the Global Coordinators, Bookrunners and Mandated Lead Arrangers; the entities listed in Part III of Schedule 1 thereto, as the Bookrunners and Mandated Lead Arrangers; the entities listed in Part IV of Schedule 1 thereto, as the Mandated Lead Arrangers; the entities listed in Part V of Schedule 1 thereto, as the Arrangers; the financial institutions listed in Part II of Schedule 1 thereto, as the Original Lenders; NatWest Markets Plc, as the Agent NatWest Markets Plc, as the Issuing Agent; and the other parties thereto entered into a five-year senior facilities agreement (as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, the “Revolving Credit Facilities Agreement”). The Revolving Credit Facilities Agreement provides for a $1,200.0 million multi-currency revolving credit facility and a €725.0 million multi-currency revolving credit facility (the “Revolving Credit Facilities”). The Revolving Credit Facilities may be utilized by way of letters of credit up to an aggregate maximum amount equal to certain sub-limits and the U.S. dollar facility may be used by way of U.S. dollar swingline loans. Drawings under the Revolving Credit Facilities Agreement may be used for general corporate purposes. The Revolving Credit Facilities bear interest at a variable rate based on our public debt ratings and are subject to customary covenants, representations and warranties, events of default and provisions regarding amendments and waivers. The Revolving Credit Facilities have been secured on an equal and ratable basis by the Collateral and guaranteed on a pari passu basis. Borrowers and Guarantors We, IGT US HoldCo and IGT Global Solutions Corporation may borrow under one of the Revolving Credit Facilities and we and the Italian Guarantor may borrow under the other Revolving Credit Facility. A mechanism is included in the Revolving Credit Facilities Agreement to enable certain of our other subsidiaries to accede as borrowers under the Revolving Credit Facilities Agreement subject to certain conditions. Subject to certain guarantee limitations, we and the Guarantors guarantee all amounts payable to each Finance Party (as defined in the Revolving Credit Facilities Agreement) and each Hedging Bank (as defined in the Revolving Credit Facilities Agreement). The Revolving Credit Facilities Agreement requires that (subject to agreed security principles) each Material Subsidiary (which definition includes, inter alia, any subsidiary of the Issuer whose (a) (x) total unconsolidated assets excluding excluded assets are greater than or equal to ten percent (10%) (if the subsidiary is not a guarantor) or (y) five percent (5%) (if the subsidiary is a guarantor) of the total consolidated assets of the Group excluding the excluded assets, or (b) (x) unconsolidated earnings before interest, taxes, depreciation and amortization (calculated on the same basis that EBITDA of the Group is calculated but excluding excluded EBITDA entries) are greater than or equal to ten percent (10%) (if the subsidiary is not a guarantor) or (y) five percent (5%) (if the subsidiary is a guarantor) of the EBITDA of the Group excluding the excluded EBITDA entries. We are also required to ensure that the guarantors represent not less than 85% of EBITDA (excluding the excluded EBITDA entries) and 85% of total unconsolidated assets (less excluded assets) of the Group, calculated semi-annually. Maturity and Repayment Requirements The Revolving Credit Facilities Agreement matures on July 26, 2021. However, if a lender under the Revolving Credit Facilities Agreement so requires, the agent shall cancel the commitment of such lender and require the repayment of the participation of such lender upon the occurrence of certain events, including a change of control and the sale of all or substantially all of the assets of the Group whether in a single transaction or a series of related transactions (other than those permitted under the Revolving Credit Facilities Agreement).
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Financial Covenants The Revolving Credit Facilities Agreement contains financial covenants, as to which we must certify compliance quarterly (or annually and semiannually if certain credit ratings are achieved). These covenants include meeting specified minimum ratios of EBITDA to total net interest costs and specified maximum ratios of total net debt to EBITDA. Events of Default The Revolving Credit Facilities Agreement contains events of default that are customary for such an agreement, all of which are subject to customary materiality and other qualifications, exceptions, baskets or grace periods, as appropriate. Governing Law and Jurisdiction The Revolving Credit Facilities Agreement is governed by English law and disputes thereunder are subject to the jurisdiction of English courts. Term Loan Facility Agreement On July 25, 2017, the Issuer, as Borrower; certain Subsidiaries of the Issuer, as the Original Guarantors; Bank of America Merrill Lynch International Limited and Mediobanca — Banca di Credito Finanziario S.p.A. as Global Coordinators, Bookrunners, and Mandated Lead Arrangers; BNP Paribas, Italian Branch, Banca IMI S.p.A., and UniCredit Bank AG, Milan Branch, as Bookrunners and Mandated Lead Arrangers; Barclays Bank PLC, Credit Agricole Corporate & Investment Bank, Milan Branch, ING Bank N.V. – Milan Branch, National Westminster Bank PLC, Socgen Inversiones Financiers S.A.U., The Bank of Nova Scotia, and Credit Suisse AG, Milan Branch as Mandated Lead Arrangers; Mediobanca — Banca di Credito Finanziario S.p.A., as the Agent; and the other parties thereto entered into a €1.500 billion term loan facility agreement maturing in January 2023 (as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, the “Term Loan Facility Agreement”). The Term Loan Facility Agreement provides for up to three loans under the Term Loan Facility Agreement, with each loan having a minimum principal amount of €400.0 million (or if less, the amount of the remaining facility). The availability period ended on December 31, 2017. We used the proceeds of the utilizations under the Term Loan Facility Agreement to (i) prepay the €800.0 million term loan facilities due 2019 in the third quarter of 2017; (ii) redeem the €500.0 million 6.625% Senior Secured Notes due 2018 when they matured on February 2, 2018; and (iii) prepay €160.0 million under the Revolving Credit Facilities in the fourth quarter of 2017. We used the remaining €40.0 million for general corporate purposes. The Term Loan Facility bears interest at a variable rate based on EURIBOR plus a variable margin based on our applicable public debt ratings. The Term Loan Facility Agreement is subject to standard covenants, representations and warranties, events of default and provisions regarding amendments and waivers. The Term Loan Facility Agreement is secured on an equal and ratable basis by the Collateral and is guaranteed by the Guarantors on a pari passu basis. Guarantors Subject to certain guarantee limitations, we and the Guarantors guarantee all amounts payable to each Finance Party. The Term Loan Facility Agreement requires that (subject to agreed security principles) each Material Subsidiary (which definition includes, inter alia, any subsidiary of the Issuer whose (a) (x) total unconsolidated assets excluding excluded assets are greater than or equal to ten percent (10%) (if the subsidiary is not a guarantor) or (y) five percent (5%) (if the subsidiary is a guarantor) of the total consolidated assets of the Group excluding the excluded assets, or (b) (x) unconsolidated earnings before interest, taxes, depreciation and amortization (calculated on the same basis that EBITDA of the Group is calculated but excluding excluded EBITDA entries) are greater than or equal to ten percent (10%) (if the subsidiary is not a guarantor) or (y) five percent (5%) (if the subsidiary is a guarantor) of the EBITDA of the Group excluding the excluded EBITDA entries. We are also required to ensure that the guarantors represent not less than 85% of EBITDA (excluding the excluded EBITDA entries) and 85% of total unconsolidated assets (less excluded assets) of the Group, calculated semi-annually.
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Maturity and Repayment Requirements We must repay the Term Loan Facility in four installments, with installments of €320.0 million due on each of January 25, 2020, January 25, 2021 and January 25, 2022 and a final installment of €540.0 million due on January 25, 2023. The Term Loan Facility Agreement provides for mandatory prepayment upon the occurrence of certain events, including a change of control and the sale of all or substantially all of the assets of the Group whether in a single transaction or a series of related transactions (other than those permitted under the Term Loan Facility Agreement). Financial Covenants The Term Loan Facility Agreement contains financial covenants, as to which we must certify compliance quarterly (or annually and semiannually if certain credit ratings are achieved). These covenants include meeting specified minimum ratios of EBITDA to total net interest costs and specified maximum ratios of total net debt to EBITDA. Events of Default The Term Loan Facility Agreement contains events of default that are customary for such an agreement, all of which are subject to customary materiality and other qualifications, exceptions, baskets or grace periods, as appropriate. Governing Law and Jurisdiction The Term Loan Facility Agreement is governed by English law and disputes thereunder are subject to the jurisdiction of English courts. Existing Notes and Existing IGT US HoldCo Notes 2020 4.750% Notes General We received aggregate proceeds of €500,000,000 from the 2020 4.750% Notes. Interest is payable annually on the 2020 4.750% Notes and the 2020 4.750% Notes mature on February 15, 2020. The 2020 4.750% Notes are listed on the Luxembourg Stock Exchange and have been admitted to trading on the Euro MTF Market. Interest rate adjustment Interest payable in respect of the 2020 4.750% Notes is subject to a 1.25% per annum upwards or downwards adjustment in the event of the occurrence of certain specified events relating to ratings (as specified in the terms and conditions of the 2020 4.750% Notes). The interest payable in respect of the 2020 4.750% Notes is not permitted to fall below the initial interest rate (3.500%) and is not permitted to exceed the initial interest rate plus 1.25% per annum. Negative Pledge The 2020 4.750% Notes (and the Existing Indenture relating thereto) are governed by the laws of England and Wales and have the benefit of a negative pledge covenant. In certain circumstances, such negative pledge covenant requires us to secure our obligations or the Guarantors to secure their obligations under the 2020 4.750% Notes (and the Existing Indenture relating thereto) on an equal and ratable basis with other present or future secured obligations. Change of Control Repurchase Offers Holders of the 2020 4.750% Notes have the option to require us to redeem the relevant notes following the occurrence of certain events specified in the terms and conditions of the relevant notes, including a change of control of us or IGT Global Solutions Corporation or the disposal of all or substantially all of the assets of us and our subsidiaries taken as a whole.
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Other terms The terms and conditions of the 2020 4.750% Notes contain customary events of default. Certain of the events of default contain grace periods, or materiality thresholds, each of which are detailed in the terms and conditions of the 2020 4.750% Notes. Guarantees and Collateral The 2020 4.750% Notes are unconditionally and irrevocably guaranteed by the Guarantors on a joint and several basis. In addition, the 2020 4.750% Notes are secured on an equal and ratable basis by the Collateral. The Existing Notes Issued in 2015 We issued the Existing Notes Issued in 2015 in April 2015 in connection with the acquisition by GTECH S.p.A. of IGT US HoldCo. We received aggregate proceeds of $3,200,000,000 and €1,550,000,000 from the Existing Notes Issued in 2015. Interest is payable semi-annually and the notes mature on February 15 of the applicable year in the title of the notes. The Existing Notes Issued in 2015 are included on the Official List of Euronext Dublin and have been admitted to trading on the Global Exchange Market of Euronext Dublin. Covenants The Existing Indenture governing the Existing Notes Issued in 2015 contains certain negative covenants. Set forth below is a brief description of such covenants, all of which are subject to customary materiality or other qualifications and exceptions. Negative Covenants The negative covenants include restrictions, among others, with respect to: (i) granting liens, (ii) incurrence of additional indebtedness by non-guarantors, (iii) impairing security interests in the Collateral; (iv) certain mergers and sales of assets; (v) change of control and (vi) granting guarantees of certain indebtedness by non-Guarantor subsidiaries. Change of Control Repurchase Offers We are required to make change of control offers at a price of 101% and may be required to repurchase all of the Existing Notes Issued in 2015 if a change of control event occurs. Other Terms The Existing Indenture governing the Existing Notes Issued in 2015 contains events of default that are customary for such financings, subject to customary materiality and other qualifications and exceptions. Guarantees and Collateral The Existing Notes Issued in 2015 are unconditionally and irrevocably guaranteed by the Guarantors on a joint and several basis. In addition, the Existing Notes Issued in 2015 are secured on an equal and ratable basis by the Collateral. The Existing IGT US HoldCo Notes With respect to the 2019 Notes, IGT US HoldCo received aggregate proceeds of $500,000,000. Interest is payable semi-annually and the 2019 Notes mature on June 15, 2019. $144,303,000 of the principal amount of the 2019 Notes remain outstanding as of March 31, 2018. With respect to the 2020 5.500% Notes, IGT US HoldCo received aggregate proceeds of $300,000,000. Interest is payable semi-annually and the 2020 5.500% Notes mature on June 15, 2020. $124,143,000 of the principal amount of the 2020 5.500% Notes remain outstanding as of March 31, 2018. With respect to the 2023 5.350% Notes, IGT US HoldCo received aggregate proceeds of $500,000,000. Interest is payable semi-annually and the 2023 5.350% Notes mature on October 15, 2023. $60,567,000 of the principal amount of the 2023 5.350% Notes remain outstanding as of March 31, 2018.
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Covenants The Existing IGT US HoldCo Indentures contain certain affirmative and negative covenants. Set forth below is a brief description of such covenants, all of which are subject to customary materiality or other qualifications and exceptions. Affirmative Covenants The affirmative covenants include, among others: (i) maintaining proper books and records; (ii) maintenance of insurance and properties; (iii) payment of taxes; and (iv) maintenance of corporate existence and material assets. Negative Covenants The negative covenants include restrictions, among others, with respect to: (i) changing the general nature of the business, (ii) incurrence of additional indebtedness by restricted subsidiaries, (iii) granting of liens; (iv) certain mergers and sales of assets; and (v) change of control. Change of Control Repurchase Offers IGT US HoldCo is required to make change of control offers and may be required to repurchase all of the 2019 Notes, the 2020 5.500% Notes and the 2023 5.350% Notes if a change of control repurchase event (as defined in the relevant Existing IGT US HoldCo Indenture) occurs. Other Terms The Existing IGT US HoldCo Indentures contain events of default that are customary for such financings and certain representations and warranties, subject to customary materiality, actual knowledge and other qualifications and exceptions. Guarantees and Collateral The Existing IGT US HoldCo Notes are unconditionally and irrevocably guaranteed by the Guarantors on a joint and several basis. In addition, the Existing IGT US HoldCo Notes are secured on an equal and ratable basis by the Collateral to the extent the Collateral constitutes property or assets of IGT US HoldCo or a subsidiary of IGT US HoldCo. Intercreditor Agreement To establish the relative rights of certain creditors under the financing arrangements of, among others, the Issuer, each of the Guarantors and certain other subsidiaries of the Issuer (together, along with any other subsidiaries of the Issuer that accede to the Intercreditor Agreement, the “Debtors”) entered into an intercreditor agreement with, among others (including certain parties that have subsequently acceded): (a) the Security Agent; (b) the lenders under the Revolving Credit Facilities Agreement (the “RCF Lenders”); (c) the facility agent under the Revolving Credit Facilities Agreement (the “RCF Facility Agent”); (d) the issuing agent under the Revolving Credit Facilities Agreement (the “RCF Issuing Agent”); (e) the U.S. dollar swingline lenders under the Revolving Credit Facilities Agreement (the “RCF Swingline Lenders”); (f) the Trustee (on or around the Issue Date); (g) the trustee of the 2019 Notes (the “2019 Notes Trustee”); (h) the trustee of the 2020 5.625% Notes (the “2020 5.625% Notes Trustee”); (i) the trustee of the 2020 4.125% Notes (the “2020 4.125% Notes Trustee”);
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(j) the trustee of the 2020 4.750% Notes (the “2020 4.750% Notes Trustee”); (k) the trustee of the 2020 5.500% Notes (the “2020 5.500% Notes Trustee”); (l) the trustee of the 2022 Notes (the “2022 Notes Trustee”); (m) the trustee of the 2023 4.750% Notes (the “2023 4.750% Notes Trustee”); (n) the trustee of the 2023 5.350% Notes (the “2023 5.350% Notes Trustee”); (o) the trustee of the 2025 Notes (the “2025 Notes Trustee”); (p) the facility agent under the Term Loan Facility Agreement (the “Term Facility Agent”); and (q) the hedging counterparties under secured hedging provided to the Issuer and the Guarantors (the “Hedging Counterparties”). The RCF Lenders, the RCF Facility Agent, the RCF Issuing Agent, the RCF Swingline Lenders and the Security Agent in its capacity as parallel creditor in respect of liabilities owing in respect of the Revolving Credit Facilities Agreement are together the “RCF Creditors.” The Term Facility Agent and the Security Agent in its capacity as parallel creditor in respect of amounts owing under the Term Facility are together the “Term Creditors.” The RCF Creditors and the Term Creditors are together the “Facility Creditors.” The RCF Agent and the Term Facility Agent are together the “Facility Agents.” The Trustee, the 2019 Notes Trustee, 2020 5.615% Notes Trustee, 2020 4.125% Notes Trustee, 2020 4.750% Notes Trustee, 2020 5.500% Notes Trustee, 2022 Notes Trustee, 2023 4.750% Notes Trustee, 2023 5.350% Notes Trustee, and the 2025 Notes Trustee are together the “Notes Trustees.” The Existing Notes, the Existing IGT US Holdco Notes and the Notes are together the “Secured Notes.” The Revolving Credit Facilities Agreement and the Term Facility are together the “Secured Facilities.” The Intercreditor Agreement sets forth, among other things: (a) the relative ranking of certain indebtedness and security of the Debtors; (b) when payments can be made in respect of certain indebtedness of the Debtors; (c) when enforcement actions can be taken in respect of that indebtedness and the Collateral; (d) the terms pursuant to which that indebtedness will be subordinated; (e) turnover provisions; (f) when security and guarantees will be released to permit a sale of any assets subject to transaction security; and (g) the order for applying proceeds from enforcement action and other amounts received by the Security Agent. The Intercreditor Agreement contains provisions relating to other and future indebtedness that may be incurred that is permitted or not prohibited by the Secured Facilities and the Secured Notes, including: (a) obligations to the Hedge Counterparties (such obligations, the “Hedging Liabilities,” and each finance document relating thereto, a “Hedging Agreement”); (b) indebtedness under credit facilities entitled to be treated pari passu with the Secured Facilities and the Secured Notes (excluding Hedging Liabilities) in respect of the Collateral and under the terms of the Intercreditor Agreement (such indebtedness, together with the Secured Facilities, the “Credit Facility Lender Liabilities,” and the holders of such indebtedness (including arrangers), the “Credit Facility Lenders,” and each finance document relating thereto, a “Credit Facility Document” and each such financing a “Credit Facility”); and (c) indebtedness under notes entitled to be treated pari passu with the Secured Facilities and Secured Notes (excluding Hedging Liabilities) in respect of the Collateral and under the terms of the Intercreditor Agreement (such indebtedness, together with the Secured Notes, the “Senior Secured
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Notes Liabilities,” and the holders of such indebtedness, the “Senior Secured Notes Creditors,” each finance document relating thereto, a “Senior Secured Notes Document,” and each such financing a “Senior Secured Notes Issue”). The following description is a summary of certain provisions contained in the Intercreditor Agreement. Ranking and Priority The Intercreditor Agreement provides that the liabilities will rank in right and priority of payment in the following order and are postponed and subordinated to any prior-ranking liabilities as follows: (a) first, the “Senior Secured Liabilities” consisting of the Credit Facility Lender Liabilities, the Senior Secured Notes Liabilities and interest rate exposure or currency exposure Hedging Liabilities permitted to be secured under the Credit Facility Documents and the Senior Secured Notes Documents (the “Priority Hedging Liabilities”) (the holders of such Senior Secured Liabilities, the “Senior Secured Creditors”), amounts owed to the Facility Agents or any other agent or trustee acting in respect of Credit Facility Lender Liabilities (together the “Senior Secured Facility Agents” and such amounts owed to the Senior Secured Facility Agents, the “Senior Secured Facility Agent Amounts”), amounts owed to the Notes Trustees or any other agent or trustee acting in respect of Senior Secured Notes Liabilities (together the “Senior Secured Notes Trustees” and such amounts owed to the Senior Secured Notes Trustees, the “Senior Secured Notes Trustee Amounts”) and amounts owed to the Security Agent pari passu and without any preference between them; (b) second, certain intercompany obligations of the Issuer and its subsidiaries (the “Group”) to other members of the Group (the “Intra-Group Liabilities”) pari passu between themselves and without any preference between them (certain members of the Group are required to accede to the Intercreditor Agreement in respect of certain intercompany loans or credit granted to a Debtor in an aggregate amount of $10.0 million or more) or which are otherwise required to be subordinated under the Notes; and (c) third, investor debt consisting of any liabilities owed to shareholders of the Issuer from time to time (the “Shareholder Liabilities”). Ranking and Priority of Security (a) The Intercreditor Agreement provides that the Collateral secures (but only to the extent such security is expressed to secure such liabilities) pari passu and without any preference between them, the Credit Facility Lender Liabilities, the Senior Secured Notes Liabilities, the Priority Hedging Liabilities, the Senior Secured Facility Agent Amounts and the Senior Secured Notes Trustee Amounts. (b) Under the terms of the Intercreditor Agreement only certain of the collateral for the Notes and the Existing Notes are required to secure the Existing IGT US HoldCo Notes and the holders of the Existing IGT US HoldCo Notes are not entitled to vote on the enforcement of any security which does not secure the Existing IGT US HoldCo Notes (the “Restricted Notes Security”). To the extent any of the collateral for the Notes or the Existing Notes does not secure all of the Credit Facility Lender Liabilities or the other Senior Secured Notes Liabilities, that collateral and those liabilities that are not secured thereunder and the holders of such liabilities, will be treated under the Intercreditor Agreement in the same manner as the Restricted Notes Security and, in relation to the Restricted Notes Security, Existing IGT US Holdco Notes and holders thereof. (c) Under the Intercreditor Agreement, all proceeds from enforcement of the security (irrespective of the manner in which such security is constituted) will be applied as provided under “—Application of Proceeds.” Restrictions on Credit Facility Lender Liabilities and Senior Secured Notes Liabilities The Intercreditor Agreement imposes no restrictions on payments to be made in respect of the Credit Facility Lender Liabilities made pursuant to the Credit Facility Documents or the Senior Secured Notes Liabilities made pursuant to the Senior Secured Notes Documents.
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Security and Guarantees The Credit Facility Lenders or the Senior Secured Notes Creditors may take, accept or receive the benefit of: (a) any security from members of the Group in respect of their liabilities if, at the same time it is offered to secure the other Senior Secured Liabilities to the extent required under the applicable Credit Facility Documents, Senior Secured Notes Documents, and Hedging Agreements (together, the “Senior Secured Documents”); and (b) any guarantee, indemnity or other assurance against loss from members of the Group in respect of their liabilities in addition to those in the original form of the Senior Secured Documents, the Intercreditor Agreement and those already shared by the Senior Secured Liabilities if, at the same time it is offered in respect the other Senior Secured Liabilities to the extent required under the applicable Senior Secured Documents. Enforcement of Collateral The Security Agent may refrain from enforcing the Collateral unless otherwise instructed by the relevant Instructing Group (or, in the circumstances contemplated below, the Majority Senior Secured Creditors). Instructing Group The “Instructing Group” entitled to give instructions to the Security Agent in respect of enforcement of security means, acting separately, the requisite group of bondholders entitled to give such instructions under the Indenture, or the requisite group of bondholders entitled to give such instructions under the relevant trust deed or indenture for any applicable series of the Secured Notes, or the requisite group of the bondholders entitled to give instructions under the indenture or trust deed for any future Senior Secured Notes Issue, or (in the case of each Credit Facility) the requisite group of lenders entitled to give such instructions under that Credit Facility (each a “Creditor Group”) (in each case acting through a Senior Secured Notes Trustee or a Senior Secured Facility Agent, each such representative a “Creditor Representative”), or, in the circumstances contemplated below, the Majority Senior Secured Creditors. The “Majority Senior Secured Creditors” consist of those Senior Secured Creditors whose credit participations at that time aggregate more than 50% of the total Senior Secured Credit participations at that time. If one Creditor Group gives enforcement instructions that follow the agreed Enforcement Principles and no other Creditor Group gives conflicting enforcement instructions to the Security Agent to enforce the Collateral, the Security Agent will (subject to the consultation regime set out below) follow the enforcement instructions of the first Creditor Group. If the Security Agent receives conflicting enforcement instructions from Creditor Groups as to the manner of enforcement of any Collateral, the enforcement instructions provided by the Majority Senior Secured Creditors that follow the agreed Enforcement Principles will prevail if the consultation procedures (as described below), if applicable, have been complied with; provided that in no event shall a Creditor Group previously requesting enforcement be required to withdraw any acceleration request. In addition if the Security Agent receives enforcement instructions from a Creditor Group to enforce the Collateral and, subsequently, later instructions to enforce (or refrain from enforcing) the Collateral from the Majority Senior Secured Creditors that follow the agreed Enforcement Principles, the enforcement instructions of the Majority Senior Secured Creditors will prevail if the consultation procedures (as described below) have been complied with unless: (a) the Security Agent (or such other person as may be duly authorized) has not commenced any enforcement of the security (or transaction in lieu thereof) or other enforcement action in accordance with such Majority Senior Secured Creditor instruction within three months of the Proposed Enforcement Instruction Date under any earlier enforcement instructions; or (b) the security has become enforceable as a result of the occurrence of an insolvency event and the Security Agent has not commenced any enforcement of the Collateral (or transaction in lieu thereof) or other enforcement action at that time (other than to the extent such insolvency event occurred as a result of action taken in accordance with the Intercreditor Agreement).
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The enforcement instructions of the Majority Senior Secured Creditors that follow the agreed Enforcement Principles will prevail after completion of a Second Consultation Period (as defined below) with no agreement reached as to the method of enforcement. The Security Agent shall not be obliged to comply with enforcement instructions which do not follow agreed Enforcement Principles. The holders of the Existing IGT US Holdco Notes shall not form a Creditor Group entitled to give enforcement instructions or be included in determining whether the vote of the Majority Senior Secured Creditors has been obtained in relation to the enforcement of the Restricted Notes Security. Enforcement Instructions and Consultation If the security has become enforceable and a Creditor Group wishes to instruct the Security Agent to commence enforcement of any security or refrain from enforcing the security, such group of creditors must deliver a copy of the proposed instructions as to enforcement (the “Enforcement Proposal”) to the Security Agent and the Creditor Representative for each of the other Creditor Groups at least five business days prior to the proposed date of issuance of instructions under such enforcement proposal (the “Proposed Enforcement Instruction Date”). If the Security Agent has received conflicting enforcement instructions then the Security Agent will promptly notify the relevant Creditor Representatives each secured Hedging Counterparty and such Creditor Representatives, secured Hedging Counterparties and the Senior Secured Creditors will consult with each other and the relevant Security Agent for a period of not less than 30 days (or such shorter period as the relevant Creditor Representatives may agree) (the “Initial Consultation Period”) from the date of the original Enforcement Proposal, with a view to agreeing on instructions as to enforcement. For the purpose of triggering an Initial Consultation Period, the failure by a Creditor Group or the Majority Senior Secured Creditors to give enforcement instructions will be deemed to be an instruction inconsistent with any other instructions given. Prior to the occurrence of the irrevocable payment and discharge of the Credit Facility Lender Liabilities and the Senior Secured Notes Liabilities, if no agreed instructions have been issued to the Security Agent within 30 days of receipt of any Enforcement Proposal and it is not reasonable to expect an enforcement within six months of the Proposed Enforcement Instruction Date, the Creditor Representative for a Creditor Group may require a further consultation period of 30 days from the date such request is issued (the “Second Consultation Period”). If no agreement is reached as to the method of enforcement after the Initial Consultation Period or, if applicable, the Second Consultation Period, the instructions of the Majority Senior Secured Creditors will prevail in the circumstances provided above. The Creditor Representatives, the secured Hedging Counterparties and the Senior Secured Creditors will not be obliged to consult as described above and the Security Agent will follow the enforcement instructions of the first Creditor Group to provide them (or, if received, the instructions of the Majority Senior Secured Creditors) so long as they are consistent with the Enforcement Principles if: (a) the security has become enforceable as a result of an insolvency event; (b) a Creditor Group or the Majority Senior Secured Creditors determine in good faith that to do so and thereby delay commencement of enforcement could reasonably be expected to have a material adverse effect on (A) the Security Agent’s ability to enforce any of the security or (B) the potential amount of realization proceeds of any enforcement of the security available to such Creditor Group; or (c) the Creditor Representatives for each Creditor Group agree that no consultation period is required or agree to a shorter consultation period. Prior to the irrevocable payment and discharge of the Credit Facility Lender Liabilities and the Senior Secured Notes Liabilities, the Hedging Counterparties will not have an independent right to instruct the Security Agent to enforce security but shall vote together with other Senior Secured Creditors for the purposes of determining the instructions with regard to enforcement of the Majority Senior Secured Creditors by reference to the amount of their actual closed-out Priority Hedging Liabilities.
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Release of the Guarantees and the Security—Non-distressed disposal In circumstances in which a disposal to a person is permitted or not prohibited under the relevant financing documents and is not being effected: (a) at the request of the Instructing Group (or, in the circumstances contemplated above, the Majority Senior Secured Creditors) in circumstances in which the security has become enforceable; (b) by the enforcement of security; or (c) after an acceleration event in respect of the Senior Secured Liabilities has occurred ((b) and (c), a “Distress Event” and a disposal in the circumstances of (a), (b) or (c), a “Distressed Disposal”), the Intercreditor Agreement provides that the Security Agent is authorized to release the security interests in the Collateral over that asset and, if the relevant asset consists of shares in the capital of a Debtor, to release the security interests in the Collateral and any other claim relating to the Senior Secured Liabilities over the assets of that Debtor and the shares in and assets of any of its subsidiaries, provided that, in each case, the release of security interests in the Collateral will only be effective upon the making of the disposal. Release of the Guarantees and the Security—Distressed Disposal Where a Distressed Disposal of an asset is being effected, the Intercreditor Agreement provides that the Security Agent is authorized: (a) in respect of the disposal to a person who is not a member of the Group of an asset forming part of the security, to release the security interests in the Collateral, or any other claim over the relevant asset; (b) if the asset that is disposed of consists of shares in the capital of a Debtor and the disposal is to a person who is not a member of the Group, to release that Debtor and any subsidiary of that Debtor from all or any part of the liabilities under the Senior Secured Documents and certain other liabilities, security granted by that Debtor (or any subsidiary of that Debtor), any Intra-Group liabilities or any Shareholder Liabilities; (c) if the asset that is disposed of consists of shares in the capital of a holding company of a Debtor and the disposal is to a person who is not a member of the Group, to release that holding company and any subsidiary of holding company from all or any part of the liabilities under the Senior Secured Documents and certain other liabilities, security granted by that holding company (or any subsidiary of that holding company), any Intra-Group Liabilities or any Shareholder Liabilities; (d) if the asset that is disposed of consist of shares in the capital of Debtor (or a holding company of a Debtor) and the disposal is on the basis that the transferee will not be treated as a Senior Secured Creditor or secured party under the Intercreditor Agreement, to dispose of all or any part of the liabilities of such Debtor (or holding company or any subsidiary of such Debtor or holding company) under the Senior Secured Documents and certain other liabilities and intra-Group receivables owed by such Debtor (or holding company or any subsidiary of such Debtor or holding company); (e) if the asset that is disposed of consists of shares in the capital of a Debtor (or a holding company of a Debtor) and the disposal is on the basis that the transferee will be treated as a Senior Secured Creditor and secured party under the Intercreditor Agreement, to dispose of all but not part of the liabilities of such Debtor (or holding company of a Debtor or subsidiary of such Debtor or holding company) under the Senior Secured Debt Documents and certain other liabilities and intra-Group receivables owed by that Debtor or holding company or any subsidiary of that holding company; and (f) if the asset that is disposed of consists of shares in the capital of a Debtor (or a holding company of a Debtor), to transfer to another Debtor of all or any part of the obligations of such disposed entity or its subsidiary in respect of Intra-Group Liabilities, Shareholder Liabilities or intra-Group receivables owed to a Debtor. The net proceeds from each Distressed Disposal (and any disposal of liabilities pursuant to (c) above) shall be paid to the Security Agent for application in accordance with the provisions described under “—Application of Proceeds” as if those proceeds were an enforcement of the security. If a Distressed Disposal is being effected
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such that borrowing liabilities, guarantee liabilities or security will be released, it is a further condition to such release that: (a) the proceeds of such sale or disposal are to be received all or substantially all in cash or other marketable securities or the requirements of paragraph (c)(iii) below are satisfied; (b) all Senior Secured Liabilities owed by (i) a member of the Group whose shares are pledged and are to be sold or disposed of and (ii) each of its subsidiaries, are unconditionally released and discharged or sold or disposed of concurrently with the sale or disposal of shares (and not assumed by a purchaser or an affiliate of a purchaser) and all security over any asset to be sold or disposed of is unconditionally released or discharged concurrently with the sale or disposal of the asset (provided that if any Senior Secured Liabilities owed by a member of the Group are sold or disposed of instead of being released then each of the Creditor Representatives determine on behalf of the Creditor Group it represents that such sale or disposal will result in higher recoveries for such Creditor Group than if the Senior Secured Liabilities were released or discharged and notify such determination to the Security Agent); (c) such sale or disposal of any shares, assets or Senior Secured Liabilities is made: (i) pursuant to a public auction or other competitive sales process satisfying the requirements of the Intercreditor Agreement; or (ii) pursuant to a process or proceeding approved or supervised by or on behalf of a court of law where there is a determination of value by or on behalf of the court or, once an administrator, administrative receiver, provisional liquidator, liquidator or similar official is appointed, pursuant to a sale by such person in accordance with applicable law; or (iii) the Security Agent has received a fairness opinion in respect of such sale or disposal from an independent investment bank or an internationally recognized firm of accountants or a reputable independent third party professional firm which is regularly engaged in providing valuations in respect of the relevant type and size of assets concerned selected by the Security Agent providing that the liability of such investment bank, firm of accountants or other professional firm may be limited to the amount of its fees for the engagement; and (d) the proceeds of such Distress Disposal are applied in accordance with the provisions described under “Application of Proceeds.” Turnover The Intercreditor Agreement provides that if any of the Senior Secured Creditors receives or recovers any proceeds in respect of liabilities owed to such creditor after a Distress Event, as a result of litigation or proceedings against a member of the Group or by way of set-off or the proceeds of the enforcement of any security, in each case, except in accordance with the order described under “Application of Proceeds,” it shall: (a) in relation to receipts or recoveries not received or recovered by way of set-off (i) hold that amount in trust for the Security Agent and promptly pay that amount or an amount equal to that amount to the Security Agent for application in accordance with the terms of the Intercreditor Agreement, and (ii) promptly pay an amount equal to the amount (if any) by which receipt or recovery exceeds the relevant liabilities owed to such creditor to the Security Agent for application in accordance with the terms of the Intercreditor Agreement; and (b) in relation to receipts and recoveries received or recovered by way of set-off, promptly pay an amount equal to that recovery to the Security Agent for application in accordance with the terms of the Intercreditor Agreement. The Intercreditor Agreement also requires any amounts received by creditors in respect of the Intra-Group Liabilities or Shareholder Liabilities that are not permitted payments or after the occurrence of a Distress Event or as recovered as a result of litigation or proceedings against a member of the Group or by way of set-off to be turned over to the Security Agent.
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Application of Proceeds The Intercreditor Agreement provides that amounts received from the realization or enforcement of all or any part of the security or other amounts paid to the Security Agent for application as described below will be applied in the following order of priority: (a) first, pari passu and pro rata in payment of the following amounts: (i) any sums owing to any Security Agent, any receiver or delegate, as the case may be; (ii) any Senior Secured Notes Trustee in respect of any Senior Secured Notes Trustee Amounts payable to it; (iii) to any Senior Secured Facility Agent in respect of any Senior Secured Facility Agent Amounts; and (iv) each Creditor Representative other than a Hedge Counterparty (to the extent not included already) of the unpaid fees, costs, expenses and liabilities (and all interest thereon as provided in the relevant finance documents) of each Creditor Representative and any receiver, attorney or agent appointed by such Creditor Representative under any security document or the Intercreditor Agreement (to the extent that such security has been given in favor of such obligations); (b) second, pari passu and pro rata in or towards payment of all costs and expenses incurred by any agent, the Security Agent or any Senior Secured Creditor in connection with any realization or enforcement of the security (or a transaction in lieu thereof) taken in accordance with the terms of the Intercreditor Agreement or any action taken at the request of the Security Agent; (c) third, in respect of recoveries resulting from the realization or enforcement of all or any part of the security (or transaction in lieu thereof including, without limitation, any Distressed Disposal), pari passu and pro rata in or towards payment to (i) each Creditor Representative in respect of any Credit Facility Lender Liabilities on its own behalf and on behalf of the Credit Facility Lenders; and (ii) any Hedge Counterparties in respect of any Priority Hedging Liabilities for application towards the discharge of the Priority Hedging Liabilities; and (iii) the Senior Secured Notes Trustees for application towards the discharge of the applicable Senior Secured Notes Liabilities but not, in case of the enforcement of any Restricted Notes Security or a Distressed Disposal of any asset charged thereunder, any liabilities under the Existing IGT US Holdco Notes; (d) fourth, pari passu and pro rata to the Senior Secured Notes Trustees, the Senior Secured Facility Agents and any other Creditor Representative on behalf of the Senior Secured Creditors for application towards the discharge of the Senior Secured Liabilities; (e) fifth, if none of the Debtors are under any further actual or contingent liability under any Senior Secured Document (other than any in respect of Shareholder Liabilities or Intra-Group Liabilities), in payment to any person whom the Security Agent is obliged to pay in priority to any Debtor; and (f) sixth, in payment of the surplus (if any) to the relevant Debtor or other person entitled to it. Option to Purchase After a Distress Event, by giving not less than ten days’ notice to each Creditor Representative in respect of a Credit Facility, any Creditor Group holding any Senior Secured Notes Liabilities will have the right to acquire or procure that a nominee acquires all (but not part) of the Credit Facility Lender Liabilities. Any such purchase will be on terms that will include, without limitation, payment in full in cash of an amount equal to the Credit Facility Lender Liabilities then outstanding, including in respect of any broken funding costs, as well as certain costs and expenses of the Credit Facility Lenders; after the transfer, no Creditor Facility Lender will be under any actual or contingent liability to any Debtor; the purchasing holders of the Senior Secured Notes indemnify each Creditor Facility Lender for any actual or alleged obligation to repay or claw back any amount received by such Credit Facility Lender; and the relevant transfer shall be without recourse to, or warranty from, any Credit Facility Lender. Consents, Amendments and Override In addition to customary minor, technical or administrative matter amendments by the Security Agent, the Issuer and each Creditor Representative, the Intercreditor Agreement provide that it may be amended only with the consent of the requisite number of Credit Facility Lenders under each Credit Facility, the requisite
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number of creditors in respect of each Senior Secured Notes Issue, the Issuer and the Security Agent (save for amendments expressly permitted to be made under the relevant Senior Secured Documents without such consent) unless it is an amendment, waiver or consent that has the effect of changing or that relates to: (i) any amendment to the order of priority or subordination set forth in the Intercreditor Agreement; or (ii) any amendment to the payment waterfall, turnover provisions, redistribution, new money and refinancing provisions, enforcement or amendment provisions set forth in the Intercreditor Agreement, which shall not be made without the written consent of: (a) the Security Agent; (b) in the case of each Credit Facility, all of the Credit Facility Lenders under that Credit Facility to the extent required by the terms of the applicable Credit Facility Documents; (c) any trustee that has acceded to the Intercreditor Agreement and is acting in respect of liabilities of any Secured Notes (to the extent such consent is required under the terms of such Secured Notes); (d) each Hedge Counterparty (to the extent that the amendment or waiver would materially and adversely affect the Hedge Counterparty); and (e) in the case of amendments to the amendments provisions of the Intercreditor Agreement, the Issuer. Subject to the paragraphs above and certain other exceptions, no amendment or waiver of the Intercreditor Agreement may impose new or additional obligations on or withdraw or reduce the rights of any party to the Intercreditor Agreement without the prior written consent of the party. Additional Indebtedness In the event that any Debtor incurs any additional indebtedness, or refinances existing indebtedness, that is permitted to be designated as a Senior Secured Liability under the terms of the Senior Secured Documents and is entitled to be secured by the Collateral, the liabilities in respect of such additional Senior Secured Liabilities, as the case may be, will share in the proceeds of any enforcement of Collateral on a pro rata basis with the applicable group of creditors, provided that such creditor accedes to the Intercreditor Agreement (if not already a party thereto). Enforcement Principles Instructions to enforce must be consistent with certain agreed “Enforcement Principles.” Any enforcement shall be consistent with maximizing, to the extent consistent with a prompt and expeditious realization of value, the value realized from enforcement and the relevant requirements described under “Release of the Guarantees and the Security—Distressed Disposal” shall be complied with. Existing Trustee’s Duties With respect to any action or decision to be taken by any notes trustee on behalf of holders of any notes under the Intercreditor Agreement (including in relation to any consultation on enforcement matters as described in Section 1.8), such trustee will act (or refrain from acting) on behalf of or at the direction of the relevant holders of Notes in the manner specified in the applicable trust deed or indenture with respect to matters to be determined thereunder and such trustee shall not be responsible or liable to any other person in relation to the Intercreditor Agreement as a result of so acting (or refraining to act). Governing Law The Intercreditor Agreement is governed by English law.
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DESCRIPTION OF THE NOTES The following is a description of the €500.0 million in aggregate principal amount of 3.500% Senior Secured Notes due 2024 (the “Notes”). The Notes will be issued by International Game Technology PLC, a public limited company incorporated under the laws of England and Wales (the “Issuer”) under an Indenture dated as of the Issue Date (the “Indenture”), among, inter alios, the Issuer, the Guarantors (as defined below), BNY Mellon Corporate Trustee Services Limited, as trustee (in such capacity, the “Trustee”), NatWest Markets Plc, as security agent (in such capacity, the “Security Agent”) and The Bank of New York Mellon, London Branch, as paying agent. Certain terms used in this Description of the Notes are defined under the caption “—Certain Definitions.” The Indenture, the Notes and the Guarantees will be subject to the terms of the Intercreditor Agreement and any Additional Intercreditor Agreements. The terms of the Intercreditor Agreement are important to understanding the terms and ranking of the Security Interests (as defined below). Please see “Description of Other Indebtedness—Intercreditor Agreement” for a description of the material terms of the Intercreditor Agreement. The Notes will be issued in a private transaction that is not subject to the registration requirements of the U.S. Securities Act. See “Notice to Investors.” The Indenture will not be qualified under, nor incorporate by reference any of the provisions of, or be subject to, the U.S. Trust Indenture Act. The following description is only a summary of the material terms of the Indenture. It does not, however, restate the Indenture in its entirety, and where reference is made to particular provisions of the Indenture, such provisions, including the definitions of certain terms, are qualified in their entirety by reference to all the provisions of the Indenture. You should read the Indenture and the Intercreditor Agreement because they contain additional information and because they and not this Description of the Notes define your rights as a holder of Notes. A copy of the form of the Indenture and the form of the Intercreditor Agreement may be obtained by requesting it from the Issuer at the address indicated under “Listing and General Information.” The Notes The registered holder of a Note will be treated as the owner of it for all purposes. Only registered holders will have rights under the Indenture, including, without limitation, with respect to enforcement and the pursuit of other remedies. The Notes will, upon issuance:
be general secured obligations of the Issuer;
rank pari passu in right of payment with all of the Issuer’s existing and future indebtedness that is not subordinated in right of payment to the Notes, including the obligations under the Senior Revolving Credit Facilities Agreement, the Senior Term Loan Facility Agreement and the Existing Notes;
be effectively subordinated to the Issuer’s indebtedness that is secured over property and assets that do not also secure the Notes, to the extent of the value of such property and assets;
be senior in right of payment to any of the Issuer’s existing and future subordinated indebtedness;
be guaranteed on a joint and several basis by the Guarantors;
be structurally subordinated to any existing or future indebtedness of the Subsidiaries of the Issuer that are not Guarantors; and
be represented by one or more registered Notes in global form, but in certain circumstances may be represented by Definitive Registered Notes (see “Book-Entry, Delivery and Form”). The Notes will be issued in minimum denominations of €100,000 and integral multiples of €1,000 in excess thereof. The Indenture will be unlimited in aggregate principal amount, but the initial issuance of Notes is limited to €500.0 million aggregate principal amount of Notes (the “Initial Notes”). From time to time, subject to the Issuer’s compliance with the covenants contained in the Indenture, the Issuer is permitted to
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issue additional Notes (“Additional Notes”), which shall have terms substantially identical to the Notes, except in respect of any of the following terms which shall be set forth in an Officer’s Certificate supplied to the Trustee: (1) the title of such Additional Notes; (2) the aggregate principal amount of such Additional Notes; (3) the date or dates on which such Additional Notes will be issued; (4) the rate or rates (which may be fixed or floating) at which such Additional Notes shall bear interest and, if applicable, the interest rate basis, formula or other method of determining such interest rate or rates, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable or the method by which such dates will be determined, the record dates for the determination of holders thereof to whom such interest is payable and the basis upon which such interest will be calculated; (5) the currency or currencies in which such Additional Notes shall be denominated and the currency in which cash or government obligations in connection with such series of Additional Notes may be payable; (6) the date or dates and price or prices at which, the period or periods within which, and the terms and conditions upon which, such Additional Notes may be redeemed, in whole or in part; (7) if other than denominations of €100,000 and in integral multiples of €1,000 in excess thereof in relation to Additional Notes denominated in euros, as applicable, the denominations in which such Additional Notes shall be issued and redeemed; and (8) the ISIN, Common Code, CUSIP or other securities identification numbers with respect to such Additional Notes. Such Additional Notes will be treated, along with all other series of the Notes, as a single class for the purposes of the Indenture with respect to waivers, amendments and all other matters which are not specifically distinguished for such series. Unless the context otherwise requires, for all purposes of the Indenture and this “Description of the Notes,” references to “Notes” shall be deemed to include references to the Initial Notes as well as any Additional Notes. In the event that any Additional Notes are not fungible for U.S. federal income tax purposes with any Notes previously issued, such non-fungible Additional Notes shall be issued with a separate ISIN, Common Code, CUSIP or other securities identification number, as applicable, so that they are distinguishable from such previously issued Notes. Maturity and Interest
The Notes will mature on July 15, 2024. Interest on the Notes will accrue at the rate of 3.500% per annum. Interest on the Notes will be payable in cash semi-annually in arrears on January 15 and July 15 of each year, to the holders of record of each series of Global Notes at the close of business on the business day preceding January 15 and July 15, respectively, and to the holders of record of each series of Definitive Record Notes at the close of business on the day that is fifteen (15) days preceding January 15 and July 15, respectively. The first interest payment date will be January 15, 2019. Interest on the Notes will accrue from the Issue Date or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The rights of holders to receive the payments of interest on the Notes are subject to applicable procedures of Euroclear and Clearstream, as applicable. If the due date for any payment in respect of any Notes is not a Business Day at the place at which such payment is due to be paid, the holder thereof will not be entitled to payment of the amount due until the next succeeding Business Day at such place, and will not be entitled to any further interest or other payment as a result of any such delay. Default interest will be calculated at a rate equal to the sum of the applicable interest rate on the Notes and one percent (1%).
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The Guarantees On the Issue Date, each of IGT US OpCo, IGT Canada Solutions ULC, IGT Foreign Holdings Corporation, IGT Germany Gaming GmbH, IGT Global Solutions Corporation, IGT US HoldCo and the Italian Guarantor (together with any of the Issuer’s current and future Subsidiaries that guarantee the Notes after the Issue Date, the “Guarantors”) will guarantee, jointly and severally, the Notes on a senior basis. Each Guarantee will:
be a general obligation of the applicable Guarantor;
rank pari passu in right of payment with all of the applicable Guarantor’s existing and future indebtedness that is not subordinated in right of payment to the Guarantee, including the obligations under the Senior Revolving Credit Facilities Agreement, the Senior Term Loan Facility Agreement and the Existing Notes;
be effectively subordinated to the applicable Guarantor’s indebtedness that is secured by property and assets that do not also secure its Guarantee, to the extent of the value of such property and assets;
be senior in right of payment to any of the applicable Guarantor’s existing and future subordinated indebtedness; and
be structurally subordinated to any existing and future indebtedness of the Subsidiaries of such Guarantor that are not Guarantors. The obligations of each Guarantor under its Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by such Guarantor without resulting in its obligations under its Guarantee being voidable or unenforceable under applicable law (including those relating to fraudulent conveyance or transfer, corporate benefit or purpose, financial assistance, capital maintenance, voidable preference, thin capitalization or guidance and coordination or affecting the rights of creditors generally) or the maximum amount otherwise permitted by applicable law. By virtue of these limitations, a Guarantor’s obligation under its Guarantee could be significantly less than amounts payable with respect to the Notes or a Guarantor may effectively have no obligation under its Guarantee. See “Risk Factors— Risks Relating to the Notes—The Guarantees and the security interests are subject to certain limitations on enforcement and may be limited by applicable laws or subject to certain defenses that may limit its validity and enforceability.” The validity and enforceability of the Guarantees and the liability of each Guarantor will be subject to the limitations described in “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests.” The Guarantee of a Guarantor will terminate and be released automatically: (1) in connection with any sale or disposition of all or substantially all of the assets of the applicable Guarantor (including by way of merger or consolidation) or Capital Stock of the applicable Guarantor (and the applicable Guarantor ceases to be a Subsidiary of the Issuer), in each case to a Person other than the Issuer or another Guarantor, if the sale or other disposition does not violate the Indenture; (2) in accordance with an enforcement action pursuant to the provisions of the Intercreditor Agreement or any Additional Intercreditor Agreement; (3) upon the Notes having achieved Investment Grade Status, so long as no other indebtedness is at that time guaranteed by the relevant Guarantor in a manner that would require the granting of a Guarantee under the covenant described under the caption “—Certain Covenants—Additional Guarantees;” provided, however, that at any time the Notes cease to have Investment Grade Status, to the extent permitted by Applicable Law, such Guarantee will be reinstated with respect to the Notes subject to any applicable limitations under the heading “—Certain Covenants—Additional Guarantees,” and if and only to the extent such Guarantor also guarantees the Senior Revolving Credit Facilities; (4) with respect to the Guarantee of any Guarantor (including any Guarantor that was required to provide such Guarantee pursuant to the first paragraph in the covenant described under the caption “—Certain Covenants—Additional Guarantees”), upon such Guarantor being unconditionally released and
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discharged from its liability with respect to the indebtedness giving rise (or that would have given rise if granted subsequent to the Issue Date) to the requirement to provide such Guarantee (including, for the avoidance of doubt, any Guarantee in existence on the Issue Date); (5) as described under “—Amendment, Supplement and Waiver;” or (6) upon defeasance or satisfaction and discharge of the Notes as provided below under the captions “— Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge.” Upon any occurrence giving rise to a release of a Guarantee as specified above, the Trustee will, at the request of the Issuer, execute any documents reasonably required in order to evidence or effect such release, discharge and termination in respect of such Guarantee. Each of the releases set forth above shall be effected by Trustee without the consent of the holders or any other action or consent on the part of the Trustee. Not all of the Issuer’s Subsidiaries will guarantee the Notes. The Notes will be effectively subordinated in right of payment to all liabilities of any of the Issuer’s Subsidiaries that do not guarantee the Notes, except (to the extent permitted by Applicable Law) to the extent that the Issuer is itself recognized as a creditor of the Subsidiary, in which case its claims would still be effectively subordinated to the extent of the value of any collateral securing such liabilities and would still be subordinated in right of payment to any indebtedness of the Subsidiary senior to that held by the Issuer. As of March 31, 2018, on a pro forma basis after giving effect to the offering and sale of the Notes and the use of the proceeds therefrom: (a) the Issuer and its consolidated Subsidiaries would have had approximately $8,131.7 million of total debt, of which $615.0 million is represented by the Notes; and (b) the Issuer and its consolidated Subsidiaries would have had approximately $8,087.3 million of secured total debt, of which $615.0 million is represented by the Notes. For the three months ended March 31, 2018, the Issuer and the Guarantors collectively represented 43% ($513 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, the Issuer and the Guarantors collectively represented 30% ($528 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the Issuer and the Guarantors collectively represented 196% ($4,542 million) of the Group’s net assets. The Indenture will not contain limitations on the amount of additional indebtedness that the Issuer and its Subsidiaries may incur or a restriction on the ability of the Issuer and its Subsidiaries to make payments or distributions. See “Risk Factors—Risks Relating to the Notes.” Security The obligations of the Issuer under the Notes will be secured within 90 days of the Issue Date by security interests and pledges (the “Notes Security Interests”) with respect to the following assets of the Issuer and its Subsidiaries (the “Notes Collateral”): (a) (x) all of the issued and outstanding shares of common stock of IGT US HoldCo and (y) the quotas of the Italian Guarantor; and (b) certain intercompany loans or notes in excess of $10.0 million (or the equivalent in other currencies) with respect to which the Issuer or a Subsidiary of the Issuer is the creditor and an obligor under the Senior Revolving Credit Facilities Agreement or the Senior Term Loan Facility Agreement is the debtor. The obligations of the Guarantors under the Guarantees will be secured within 90 days of the Issue Date by security interests and pledges (the “Guarantee Security Interests” and together with the Notes Security Interests, the “Security Interests”) with respect to the following assets of the Guarantors (the “Guarantee Collateral” and together with the Notes Collateral, the “Collateral”): certain intercompany loans or notes in excess of $10.0 million (or the equivalent in other currencies) (x) with respect to which an obligor (other than the Issuer) under the Senior Revolving Credit Facilities Agreement or the Senior Term Loan Facility Agreement is the creditor and the Issuer or a Subsidiary of the Issuer is the debtor or (y) with respect to which the Issuer or a Subsidiary of the Issuer is the creditor and an obligor under the Senior Revolving Credit Facilities Agreement or the Senior Term Loan Facility Agreement is the debtor.
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The Security Interests will be granted and made pursuant to, and subject to the terms of, the security documents (the “Security Documents”) to the Security Agent, acting on behalf of the holders of the obligations that are secured by the Security Interests, including holders of Notes. Each holder of Notes, by accepting a Note, shall be deemed (i) to have authorized and directed the Trustee and the Security Agent to enter into the Security Documents and the Intercreditor Agreement and (ii) to be bound thereby. Each holder of Notes, by accepting a Note, appoints the Trustee or the Security Agent as its agent under the Security Documents and the Intercreditor Agreement and authorizes it to act as such. The Security Documents will provide that the Security Interests must be exercised by the Security Agent. Because the holders of Notes are not a party to the Security Documents, holders may not, individually or collectively, take any direct action to enforce any rights in their favor under the Security Documents. The holders may only act through the Trustee or the Security Agent, as applicable. The Security Agent will agree to any release of the Security Interests in accordance with the Indenture without requiring any consent of the holders. Subject to the terms of the Intercreditor Agreement, the holders of Notes will, in certain circumstances, share in the ability to direct the Trustee to direct the Security Agent to commence enforcement action under the Security Documents. However, in enforcing the Security Interests, the Security Agent will take direction from the Trustee. Please see “Description of Other Indebtedness— Intercreditor Agreement.” Subject to the terms of the Security Documents, the Issuer will be entitled to exercise any and all voting rights and to receive and retain any and all cash dividends, stock dividends, liquidating dividends, non-cash dividends, shares of stock resulting from stock splits or reclassifications, rights issues, warrants, options and other distributions (whether similar or dissimilar to the foregoing) in respect of the shares that are part of the Collateral. The value of the Collateral may not be sufficient to satisfy the Issuer’s and the Guarantors’ obligations under the Notes and the Guarantees. Please see “Risk Factors—Risks Relating to the Notes.” There can be no assurance that the proceeds of any sale of the Collateral, in whole or in part, pursuant to the Indenture and the Security Documents following an Event of Default, would be sufficient to satisfy amounts due on the Notes and the Guarantees. By its nature, the Collateral is illiquid and has no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral would be sold in a timely manner or at all. Subject to certain conditions, including compliance with the covenants described under “—Certain Covenants—Impairment of Security Interests” and “—Certain Covenants—Liens,” the Issuer will be permitted to grant security interests and pledges with respect to the Collateral in connection with future incurrence of indebtedness or indebtedness of the Guarantors, as permitted under the Indenture and the Intercreditor Agreement. The Notes Security Interests and the Guarantee Security Interests will be granted to the Security Agent on behalf of the holders of Notes and the Guarantees, respectively and holders of the other secured obligations that are secured by the Security Interests, as applicable. Any mortgages, security interests, charges, encumbrances, pledges and other liens that may in the future be granted with respect to other assets of the Issuer or any of its Subsidiaries to secure obligations under the Notes, any Guarantees and the Indenture would also constitute “Security Interests.” The Security Interests will be limited as necessary to recognize certain limitations arising under or imposed by Applicable Law and defenses generally available to debtors (including those relating to fraudulent conveyance or transfer, corporate benefit or purpose, financial assistance, capital maintenance, voidable preference, thin capitalization or guidance and coordination or affecting the rights of creditors generally) or other considerations under Applicable Law. For a brief description of such limitations, see “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests.” Post-closing matters As soon as reasonably possible, and in any event within 90 days of the Issue Date, the Issuer shall ensure that an extension or confirmation of the pledge of the quotas of the Italian Guarantor is executed to secure the Issuer’s obligations under the Notes and to obtain all approvals, make all filings and take all other actions necessary to give effect to the foregoing.
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As soon as reasonably possible, and in any event within 90 days of the Issue Date, the Issuer shall ensure that an extension or confirmation of the pledge of all of the issued common stock of IGT US Holdco is executed to secure the Issuer’s obligations under the Notes and to obtain all approvals, make all filings and take all other actions necessary to give effect to the foregoing. Release of the Security Interests The Security Interests will be automatically and unconditionally released: (1) in connection with any sale, assignment, transfer, conveyance or other disposition of such property or assets to a Person that is not (either before or after giving effect to such transaction) the Issuer or a Subsidiary, if the sale or other disposition does not violate the Indenture; (2) in connection with any sale, transfer or other disposition of Capital Stock of a Guarantor or any holding company of such Guarantor to a Person that is not (either before or after giving effect to such transaction) the Issuer or a Subsidiary, if the sale, transfer or other disposition does not violate the Indenture, and the Guarantor ceases to be a Guarantor as a result of the sale, transfer or other disposition; (3) in accordance with an enforcement action pursuant to the provisions of the Intercreditor Agreement or any Additional Intercreditor Agreement; (4) upon the Notes having achieved Investment Grade Status, so long as no other indebtedness is at that time secured in a manner that would require the granting of a mortgage, security interest, charge, encumbrance, pledge or other lien pursuant to the covenant described under the caption “—Certain Covenants—Liens;” provided, however, that at any time the Notes receive both a rating of “Ba2” or lower from Moody’s and a rating of “BB” or lower from S&P, or the equivalent of such rating by either such rating organization or, if no rating of Moody’s or S&P then exists, the equivalent of such rating by any other Nationally Recognized Statistical Ratings Organization, to the extent permitted by Applicable Law, such mortgage, security interest, charge, encumbrance, pledge or other lien will be regranted or made to secure the obligations under the Notes; (5) if any of the Security Interests no longer secure the Senior Revolving Credit Facilities (or any refinancing thereof) (in which case release will be of the Security Interests with respect to the relevant Collateral), so long as no other indebtedness is at that time secured in a manner that would require the granting of a mortgage, security interest, charge, encumbrance, pledge or other lien pursuant to the covenant described under the caption “—Certain Covenants—Liens;” (6) in accordance with the caption entitled “—Amendment, Supplement and Waiver;” (7) upon legal defeasance, covenant defeasance or satisfaction and discharge of the Indenture as provided below under the captions “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and discharge;” (8) in accordance with the covenant described under “—Certain Covenants—Impairment of Security Interests” below; (9) at the option of the Issuer (as confirmed in an Officer’s Certificate), over any intercompany loan or note to the extent that the amount outstanding under such intercompany loan or note does not exceed $10.0 million; (10) upon repayment in full of the Notes; and (11) otherwise in accordance with the terms of the Indenture. The Security Agent will take all necessary action reasonably required to effectuate any release of the Security Interests in accordance with the provisions of the Indenture, the Intercreditor Agreement or any Additional Intercreditor Agreement and the relevant Security Document. Each of the releases set forth above shall be effected by the Security Agent without the consent of the holders or any action on the part of the Trustee.
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Limitations under Guarantees and Security Interests The obligations of each Guarantor under its Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by such Guarantor without resulting in its obligations under its Guarantee being voidable or unenforceable under applicable law (including those relating to fraudulent conveyance or transfer, corporate benefit or purpose, financial assistance, capital maintenance, voidable preference, thin capitalization or guidance and coordination or affecting the rights of creditors generally) or the maximum amount otherwise permitted by Applicable Law. By virtue of these limitations, a Guarantor’s obligations under its Guarantee could be significantly less than amounts payable in respect of the Notes, or a Guarantor may effectively have no obligations under its Guarantee. Please see “Certain Insolvency Law Considerations and Certain Italian Law Considerations in Relation to Guarantees and Security Interests” and “Risk Factors—Risks Relating to the Notes.” (a) Notwithstanding anything to the contrary provided in the Indenture, the maximum amount that the Italian Guarantor will be required to pay under its Guarantee in respect of the obligations of the Issuer and any Subsidiary of the Issuer which is not a Subsidiary of the Italian Guarantor will be limited to the Pro Rata Share of: (i) the principal amount of the indebtedness of the Italian Guarantor (or any Subsidiary of the Italian Guarantor) as “Borrower” under and as defined in the Senior Revolving Credit Facilities Agreement (including any refinancing thereof); and (ii) the principal amount of all intercompany loans (whether documented by an intercompany loan agreement, a promissory note or otherwise) advanced (or granted) to the Italian Guarantor (or any Subsidiary of the Italian Guarantor) by the Issuer or any Subsidiary of the Issuer after the date of the Senior Revolving Credit Facilities Agreement, in each case under (i) and (ii) above, as such amounts are outstanding on the first date on which a demand is made upon the Italian Guarantor to pay under a Qualifying Guarantee. (b) In any event, for the sole purposes of complying with Article 1938 of the Italian Civil Code, the maximum amount that the Italian Guarantor may be required to pay in respect of its obligations as Guarantor under its Guarantee shall not exceed €550.0 million (or the equivalent in other currencies). (c) If any creditor or class of creditors of Senior Liabilities irrevocably and unconditionally waives such Senior Liabilities or agrees not to make a demand or fails to file a claim or a demand in the context of an insolvency, bankruptcy or similar proceedings resulting in the final and irrevocable discharge of such Senior Liabilities or finally and irrevocably barring any further right to claim for payments under the relevant Qualifying Guarantee, the Pro Rata Share will be recalculated as of the initial calculation date to exclude the Senior Liabilities owed to such creditor or class of creditors on such date and the Italian Guarantor will pay any additional amounts then due under its Guarantee. (d) The amount payable under the Guarantee of the Italian Guarantor will be calculated by reference to the amounts of the Senior Liabilities which are outstanding on the first date on which a demand is made upon the Italian Guarantor to pay under a Qualifying Guarantee of those Senior Liabilities. For the purposes of such calculation amounts which are not denominated in euro will be converted into the Euro Equivalent. The Issuer agrees to provide evidence of its indebtedness for the purposes of the calculation and to ensure that all relevant creditors are under an obligation to provide information to it so that it can comply with this obligation. For purposes of this section: “Relevant Notes” means the Notes and the Existing Notes. “Pro Rata Share” means the proportion that the aggregate amount of the Senior Liabilities owed to the holders of Notes bears to the amount of all outstanding Senior Liabilities guaranteed by Qualifying Guarantees by the Italian Guarantor, as such Senior Liabilities are outstanding on the first date on which a demand is made upon the Italian Guarantor to pay under a Qualifying Guarantee.
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“Qualifying Guarantees” means guarantees permitted or not prohibited to be given by the Italian Guarantor under the Senior Revolving Credit Facilities Agreement, the Senior Term Loan Facility Agreement and the Relevant Notes, copies of which have been provided to the Security Agent, in respect of indebtedness which is permitted or not prohibited to be incurred by the Issuer and any Subsidiary of the Issuer under the Senior Revolving Credit Facilities Agreement, the Senior Term Loan Facility Agreement and the Relevant Notes and which contain a limitation equivalent to the limitation in the Guarantee of the Italian Guarantor (as certified by the Issuer to the Security Agent). “Senior Liabilities” means all amounts that are “Senior Secured Liabilities” under and as defined in the Intercreditor Agreement or which do not constitute such liabilities solely because they are unsecured and the holders thereof have accordingly not become parties to the Intercreditor Agreement. Paying Agent, Transfer Agent and Registrar for the Notes The Issuer will maintain one or more paying agents for the Notes (each, a “Paying Agent”) in London, England. The initial Paying Agent will be The Bank of New York Mellon, London Branch. The Issuer will also maintain a transfer agent for the Notes (the “Transfer Agent”) in London, England. The initial Transfer Agent will be The Bank of New York Mellon, London Branch. The Issuer will also maintain one or more registrars for the Notes (each, a “Registrar”) in Luxembourg. The initial Registrar will be The Bank of New York Mellon SA/NV, Luxembourg Branch. The Registrar will maintain a register reflecting ownership of the relevant Notes outstanding from time to time, if any, and together with the Transfer Agent will facilitate transfers of the Notes on behalf of the Issuer. The Issuer may change any Paying Agent, Transfer Agent or Registrar without prior notice to holders of Notes. However, for so long as Notes are listed on Euronext Dublin and the rules of Euronext Dublin so require, the Issuer will publish notice of any change of Paying Agent, Transfer Agent or Registrar on the official website of Euronext Dublin (www.ise.ie), or, to the extent and in the manner permitted by the rules of Euronext Dublin, such notice of the change in a Paying Agent, Transfer Agent or Registrar may instead be published in a daily newspaper with general circulation in Ireland (which is expected to be the Irish Times). The Issuer or any of its Subsidiaries may act as Paying Agent or Registrar in respect of the Notes. Transfer and Exchange The Global Notes may be transferred in accordance with the Indenture. All transfers of Book-Entry interests between participants in Euroclear or Clearstream Banking will be effected by Euroclear or Clearstream Banking pursuant to customary procedures and subject to applicable rules and procedures established by Euroclear or Clearstream Banking and their respective participants. See “Book-Entry; Delivery and Form.” The Notes will be subject to certain restrictions on transfer and certification requirements, as described under “Notice to Investors.” Redemptions Final Redemption Unless previously redeemed, or purchased and cancelled the Notes will be redeemed at their principal amount on July 15, 2024. Optional Redemption At any time prior to January 15, 2024, the Issuer may on any one or more occasions redeem all or a part of the Notes, upon not less than ten (10) nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus the Applicable Premium as of, and accrued and unpaid interest, if any, to but excluding the redemption date, subject to the rights of holders of the Notes on the relevant record date to receive interest due on the relevant interest payment date. On or after January 15, 2024, the Issuer may on any one or more occasions redeem all or a part of the Notes, upon not less than ten (10) nor more than 60 days’ prior notice, at a redemption price equal 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, on the Notes redeemed to
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but excluding the redemption date, subject to the rights of holders of the Notes on the relevant record date to receive interest due on the relevant interest payment date. General Any redemption and notice of redemption effected in accordance with the “Optional Redemption” provisions described above may, in the discretion of the Issuer, be subject to the satisfaction of one or more conditions precedent. If such redemption or purchase is subject to satisfaction of one or more conditions precedent, such notice shall describe each such condition, and if applicable, shall state that, in the Issuer’s discretion, the redemption date may be delayed until such time as any or all such conditions shall be satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date, or by the redemption date as so delayed; provided, however, that in no case shall such delayed redemption date occur more than 60 days after the date on which the notice was originally delivered. In addition, the Issuer may provide in such notice that payment of the redemption price and performance of the Issuer’s obligations with respect to such redemption may be performed by another Person. Notwithstanding the foregoing, in connection with any tender offer for any series of the Notes, including a Change of Control Offer, if holders of not less than 90% in aggregate principal amount of such series of outstanding Notes validly tender and do not withdraw such Notes in such tender offer and the Issuer, or any third party making such a tender offer in lieu of the Issuer, purchases, all of such series of Notes validly tendered and not withdrawn by such holders, the Issuer or such third party will have the right upon not less than ten (10) nor more than 60 days’ prior notice, given not more than 30 days following such tender offer expiration date, to redeem such series of Notes that remain outstanding in whole, but not in part following such purchase at a price equal to the price offered to each other holder of such series of Notes (excluding any early tender or incentive fee) in such tender offer, plus, to the extent not included in the tender offer payment, accrued and unpaid interest and Additional Amounts, if any, thereon, to, but excluding, such redemption date. Redemption for Changes in Withholding Taxes The Issuer may redeem the Notes, in whole but not in part, at its discretion at any time upon giving not less than ten (10) nor more than 60 days’ prior notice to the holders of such series of Notes (which notice will be irrevocable and given in accordance with the procedures described in “—Selection and Notice”), at a redemption price equal to 100% of the aggregate principal amount thereof, together with accrued and unpaid interest, if any, to the date fixed by the Issuer for redemption (a “Tax Redemption Date”) and all Additional Amounts (as defined in “—Withholding Taxes” below) (if any) then due and which will become due on the Tax Redemption Date as a result of the redemption or otherwise (subject to the right of holders of such Notes on the relevant record date to receive interest due on the relevant interest payment date and Additional Amounts (if any) in respect thereof), if on the next date on which any amount would be payable in respect of such Notes, the Issuer or any Guarantor is or would be required to pay Additional Amounts, and (a) the Issuer or the relevant Guarantor cannot avoid such requirement by taking reasonable measures available to it (including the designation of a different paying agent), (b) in the case of a Guarantor, such amounts cannot be paid by the Issuer or any other Guarantor who in turn can pay such amounts without the obligation to pay Additional Amounts and (c) the requirement arises as a result of: (1) any amendment to, or change in, the laws or treaties (or any regulations or rulings promulgated thereunder) of a relevant Tax Jurisdiction (as defined in “—Withholding Taxes” below) which change or amendment becomes effective on or after the Issue Date (or, if the applicable Tax Jurisdiction became a Tax Jurisdiction on a date after the Issue Date, such later date); or (2) any amendment to, or change in, an official written interpretation or application of such laws, treaties, regulations or rulings (including by virtue of a holding, judgment or order by a court of competent jurisdiction or a change in published administrative practice) which amendment or change becomes effective on or after the Issue Date (or, if the applicable Tax Jurisdiction became a Tax Jurisdiction on a date after the Issue Date, such later date) (each of the foregoing clauses (1) and (2), a “Change in Tax Law”). The Issuer will not give any such notice of redemption earlier than 60 days prior to the earliest date on which the Issuer or the relevant Guarantor would be obligated to make such payment or withholding if a payment in
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respect of such Notes was then due, and the obligation to pay Additional Amounts must be in effect at the time such notice is given. Prior to the publication or, where relevant, mailing of any notice of redemption of such Notes pursuant to the foregoing, the Issuer will deliver to the Trustee an opinion of independent tax counsel to the effect that the Issuer is or would be obligated to pay Additional Amounts as a result of a Change in Tax Law. In addition, before the Issuer publishes or mails notice of redemption of the Notes as described above, it will deliver to the Trustee an Officer’s Certificate to the effect that (a) it or the relevant Guarantor cannot avoid its obligation to pay Additional Amounts by the Issuer or the relevant Guarantor taking reasonable measures available to it and (b) in the case of a Guarantor, the amounts giving rise to such obligation cannot be paid by the Issuer or any other Guarantor without the obligation to pay Additional Amounts. The Trustee will accept and shall be entitled to conclusively rely without further inquiry on such Officer’s Certificate and opinion of counsel as sufficient evidence of the existence and satisfaction of the conditions precedent as described above, in which event it will be conclusive and binding on the holders of the applicable Notes. The foregoing will apply mutatis mutandis to any jurisdiction under the laws of which any successor Person to the Issuer is incorporated or organized or in which any successor Person to the Issuer is engaged in business or resident for tax purposes or any jurisdiction from or through which payment is made by or on behalf of such Person on the Notes and any political subdivision thereof or therein. Mandatory Redemption The Issuer is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Withholding Taxes All payments made under or with respect to the Notes or any Guarantee will be made free and clear of and without withholding or deduction for, or on account of, any present or future tax, duty, levy, assessment or other governmental charge, including any related interest, penalties or additions to tax (“Taxes”) unless the withholding or deduction of such Taxes is then required by law or by the official interpretation or administration thereof. If any deduction or withholding for, or on account of, any Taxes imposed or levied by or on behalf of (1) any jurisdiction under the laws of which the Issuer or any Guarantor is then incorporated or organized or in which the Issuer or any Guarantor is engaged in business for tax purposes or resident for tax purposes or any political subdivision or governmental authority thereof or therein having power to tax or (2) any jurisdiction from or through which payment is made by or on behalf of the Issuer or any Guarantor (including, without limitation, the jurisdiction of any paying agent for the Notes) or any political subdivision thereof or therein (each, a “Tax Jurisdiction”) will at any time be required to be made from any payments made under or with respect to the Notes or any Guarantee, including, without limitation, payments of principal, redemption price, interest or premium, then the Issuer or the relevant Guarantor, as applicable, will pay such additional amounts (the “Additional Amounts”) as may be necessary in order that the net amounts received in respect of such payments by each holder of Notes after such withholding or deduction (including any such withholding or deduction from such Additional Amounts) will equal the respective amounts that would have been received in respect of such payments in the absence of such withholding or deduction; provided, however, that no Additional Amounts will be payable with respect to: (1) any Taxes, to the extent such Taxes would not have been imposed but for the existence of any actual or deemed present or former connection between the holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over the relevant holder, if the relevant holder is an estate, nominee, trust, partnership, limited liability company or corporation) or the beneficial owner of Notes and the relevant Tax Jurisdiction (including, without limitation, being or having been a citizen, resident or national thereof or being or having been present or engaged in a trade or business therein or having or having had a permanent establishment therein), other than connections arising from the acquisition or holding of such Note or a Guarantee, the exercise or enforcement of rights under such Note or under a Guarantee or the receipt of any payments in respect of such Note or a Guarantee; (2) any Taxes, to the extent such Taxes were imposed as a result of the presentation of a Note for payment (where Notes are in the form of certificated Notes and presentation is required) more than 30
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days after the relevant payment is first made available for payment to the holder (except to the extent that the holder would have been entitled to Additional Amounts had the Note been presented on the last day of such 30 day period); (3) any estate, inheritance, gift, sales, transfer, personal property or similar Taxes imposed on transfers; (4) any Taxes payable other than by deduction or withholding from payments under, or with respect to, the Notes or with respect to any Guarantee; (5) any Taxes to the extent such Taxes are imposed or withheld by reason of the failure of the holder or beneficial owner of Notes to comply with any reasonable written request of the Issuer addressed to the holder or beneficial owner and made at least 60 days before any such withholding or deduction would be payable to satisfy any certification, identification, information or other reporting requirements, whether required by statute, treaty, regulation or administrative practice of the relevant Tax Jurisdiction, as a precondition to exemption from, or reduction in the rate of deduction or withholding of, Taxes imposed by such Tax Jurisdiction (including, without limitation, a certification that the holder or beneficial owner is not resident in the Tax Jurisdiction), but in each case, only to the extent the holder or beneficial owner is legally eligible to provide such certification or documentation; (6) any Taxes that are imposed or withheld pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), as of the Issue Date (or any amended or successor version of such sections), any regulations promulgated thereunder, any official interpretations thereof, any similar law or regulation adopted pursuant to an intergovernmental agreement between a non-U.S. jurisdiction and the United States with respect to the foregoing or any agreements entered into pursuant to Section 1471(b)(1) of the Code; or (7) any combination of items (1) through (6) above. Such Additional Amounts will also not be payable where, had the beneficial owner of the applicable Note been the holder of such Note, it would not have been entitled to payment of Additional Amounts by reason of any of clauses (1) to (7) inclusive above. In addition to the foregoing, the Issuer and the Guarantors, as the case may be, will also pay and indemnify the holder for any present or future stamp, issue, registration, court or documentary Taxes, or any other excise or property Taxes, charges or similar levies (including penalties, interest and any other reasonable expenses related thereto) which are levied by any Tax Jurisdiction on the execution, delivery, issuance, sale, enforcement or registration of the Notes, the Indenture, any Guarantee or any other document or instrument referred to therein, or the receipt of any payments with respect thereto (limited, solely in the case of taxes attributable to the receipt of any payments with respect thereto, to any such taxes imposed in a Tax Jurisdiction that are not excluded under clauses (1) through (3) or (5) through (6) above, or any combination thereof). If the Issuer or any Guarantor, as the case may be, becomes aware that it will be obligated to pay Additional Amounts with respect to any payment under or with respect to any series of Notes or any related Guarantee, each of the Issuer or the relevant Guarantor, as the case may be, will deliver to the Trustee on a date that is at least 30 days prior to the date of that payment (unless the obligation to pay Additional Amounts arises less than 30 days prior to that payment date, in which case the Issuer or the relevant Guarantor shall notify the Trustee promptly thereafter) an Officer’s Certificate stating the fact that Additional Amounts will be payable and the amount estimated to be so payable. The Officer’s Certificate must also set forth any other information reasonably necessary to enable the paying agents to pay such Additional Amounts to holders on the relevant payment date. The Trustee shall be entitled to rely solely on such Officer’s Certificate as conclusive proof that such payments are necessary. The Issuer or the relevant Guarantor will make all withholdings and deductions required by Applicable Law and will remit the full amount deducted or withheld to the relevant Tax authority in accordance with Applicable Law. The Issuer or the relevant Guarantor will use its reasonable efforts to obtain Tax receipts from each Tax authority evidencing the payment of any Taxes so deducted or withheld. The Issuer or the relevant Guarantor will furnish to the Trustee (or to a holder or beneficial owner upon written request), within a reasonable time after the date the payment of any Taxes so deducted or withheld is made, certified copies of
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Tax receipts evidencing payment by the Issuer or a Guarantor, as the case may be, or if, notwithstanding such entity’s efforts to obtain receipts, receipts are not obtained, other evidence of payments (reasonably satisfactory to the Trustee) by such entity. Upon reasonable request, copies of Tax receipts or other evidence of payments, as the case may be, will be made available by the Trustee to the holders or beneficial owners of the Notes. Whenever in the Indenture or in this “Description of the Notes” there is mentioned, in any context, the payment of amounts based upon the principal amount of the Notes or of principal, interest or of any other amount payable under, or with respect to, any of the Notes or any Guarantee, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof. The above obligations will survive any termination, defeasance or discharge of the Indenture, and any transfer by a holder or beneficial owner of its Notes, and will apply, mutatis mutandis, to any jurisdiction under the laws of which any successor Person to the Issuer or any Guarantor is incorporated or organized or in which any successor Person to the Issuer or and Guarantor is engaged in business for tax purposes or resident for tax purposes (and any political subdivision or governmental authority thereof or therein having power to tax) and any jurisdiction from or through which payment is made by or on behalf of such Person on the Notes or any Guarantee and any political subdivision thereof or therein. Selection and Notice If less than all of a series of Notes are to be redeemed at any time, the Trustee will select Notes for redemption on a pro rata basis to the extent practicable or such other method as is customary with the procedures of Euroclear or Clearstream (as applicable), including the application of a “pool factor” to the nominal amount of each Notes, unless otherwise required by law or applicable stock exchange requirements. No Note of €100,000 in aggregate principal amount or less shall be redeemed in part and only Notes in integral multiples of €1,000 will be redeemed. Notices of redemption will be mailed by first class mail or delivered electronically at least ten (10) but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address, except that redemption notices may be mailed or delivered electronically more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture. Any redemption notice may, in the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent. If such redemption is subject to the satisfaction of one of more conditions precedent, such notice shall state that, in the Issuer’s discretion, the redemption date may be delayed until such time as any or all such conditions shall be satisfied (or waived by the Issuer in its sole discretion), such redemption may not occur and such notice may be rescinded in the event that any or all of such conditions shall not have been satisfied (or waived by the Issuer in its sole discretion) by the redemption date, or by the redemption date so delayed. For so long as the Notes are listed on Euronext Dublin and the rules of Euronext Dublin so require, the Issuer shall publish notice of redemption in a daily newspaper with general circulation in Ireland (which is expected to be the Irish Times) and in addition to such publication, not less than ten (10) nor more than 60 days prior to the redemption date, mail such notice to holders by first-class mail, postage prepaid, at their respective addresses as they appear on the registration books of the Registrars. Such notice of redemption may instead be published on the website of Euronext Dublin (www.ise.ie). If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount of that Note that is to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the holder of Notes upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. Change of Control If a Change of Control occurs, each holder of Notes will have the right to require the Issuer to repurchase all or any part (equal to €100,000 in principal amount and integral multiples of €1,000 in excess thereof in the case of Notes) of such holder’s Notes pursuant to a change of control offer (the “Change of Control Offer”) on the terms set forth in the Indenture. In the Change of Control Offer, the Issuer will offer a payment (the
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“Change of Control Payment”) in cash equal to 101% of the aggregate principal amount of the Notes repurchased, plus accrued and unpaid interest, if any, on the Notes to but excluding the date of purchase, subject to the rights of holders on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Issuer will mail (or deliver electronically) a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date for payment specified in the notice (the “Change of Control Payment Date”), which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed or delivered, pursuant to the procedures required by the Indenture and described in such notice. The Issuer will comply with the requirements of Rule 14e-1 under the U.S. Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, the Issuer’s compliance with the applicable securities laws and regulations will not constitute a breach of its obligations under the Change of Control provisions of the Indenture. Except as otherwise provided herein, no later than the date that is 60 days after any Change of Control, the Issuer will mail the Change of Control Offer to each holder of Notes, with a copy to the Trustee: (1) stating that a Change of Control has occurred or may occur and that such holder has the right to require the Issuer to purchase all or any part of such holder’s Notes at a purchase price in cash equal to 101% of the principal amount of such Notes plus accrued and unpaid interest and Additional Amounts, if any, to, but not including, the date of purchase (subject to the right of holders of record on a record date to receive interest on the relevant interest payment date) (the “Change of Control Payment”); (2) stating the repurchase date (which shall be no earlier than ten (10) days nor later than 60 days from the date such notice is mailed) (the “Change of Control Payment Date”) and the record date; (3) stating that any Note accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date unless the Change of Control Payment is not paid, and that any Notes or part thereof not tendered will continue to accrue interest; (4) describing the circumstances and relevant facts regarding the transaction or transactions that constitute the Change of Control; (5) describing the procedures determined by the Issuer, consistent with the Indenture, that a holder must follow in order to have its Notes repurchased; and (6) if such notice is mailed prior to the occurrence of a Change of Control, stating that the Change of Control Offer is conditional on the occurrence of such Change of Control. On the Change of Control Payment Date, the Issuer will, to the extent lawful: (1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; (2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuer. The paying agent will promptly mail to each holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, however, that each new Note will be in a minimum principal amount of €100,000 or an integral multiple of €1,000 in excess thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.
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The provisions described above that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the holders of Notes to require that the Issuer repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Issuer will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to the Indenture as described above under the caption “—Redemptions,” unless and until there is a default in payment of the applicable redemption price. A Change of Control Offer may be made in advance of a Change of Control, with the obligation to pay and the timing of payment conditioned upon the occurrence of a Change of Control, if a definitive agreement to effect a Change of Control is in place at the time the Change of Control Offer is made. For so long as the Notes are listed on Euronext Dublin and the rules of such exchange so require, the Issuer will publish notices relating to the Change of Control Offer in a daily newspaper with general circulation in Ireland (which is expected to be the Irish Times) or to the extent and in the manner permitted by such rules, post such notices on the official website of Euronext Dublin (www.ise.ie). The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Issuer and its Subsidiaries taken as a whole. There is a limited body of case law interpreting the phrase “substantially all,” and there is no precise established definition of the phrase under Applicable Law. Accordingly, the ability of a holder of Notes to require the Issuer to repurchase its Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Issuer and its Subsidiaries taken as a whole to another Person or group is uncertain. Certain Covenants Limitation on Non-Guarantor Subsidiary Indebtedness The Issuer will not permit any of its Subsidiaries which is not a Guarantor to incur any indebtedness; provided, however, that an aggregate principal amount of indebtedness at any time outstanding not in excess of the greater of (i) $1,000.0 million (or the equivalent in other currencies) and (ii) six percent (6%) of Total Assets may be incurred by its Subsidiaries which are not Guarantors. Liens The Issuer will not and will not permit any Guarantor to, create, incur, assume or suffer to exist or become effective any mortgage, security interest, charge, encumbrance, pledge or other lien (other than Permitted Liens) upon the whole or any part of their present or future business, undertakings, assets or revenues (including uncalled capital) not constituting Collateral to secure indebtedness for borrowed money represented by notes, bonds, debentures or indebtedness under credit or other debt facilities (including the Senior Revolving Credit Facilities Agreement) with banks or other institutions providing for revolving credit or term loans, unless all payments due under the Indenture and the Notes are secured on an equal and ratable basis with the indebtedness so secured. Any such mortgage, security interest, charge, encumbrance, pledge or other lien granted or made to secure the Notes will be automatically and unconditionally released and discharged (i) upon the release and discharge of the initial mortgage, security interest, charge, encumbrance, pledge or other lien to which it relates and (ii) otherwise as set forth under “—Release of the Security Interests.”
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Merger, Consolidation or Sale of Assets The Issuer may not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Issuer is the surviving corporation) or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Issuer and its Subsidiaries, taken as a whole, in one or more related transactions, to another Person; unless: (1) either (a) the Issuer is the surviving corporation or (b) the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation, partnership or limited liability company incorporated or organized under the laws of any member state of the European Union, any member of the United Kingdom, Switzerland, Canada, the United States, any state of the United States or the District of Columbia; provided, however, that if the Person is a partnership or limited liability company, then a corporation wholly-owned by such Person incorporated or organized under the laws of any member state of the European Union, any member of the United Kingdom, Switzerland, Canada, the United States, any state of the United States or the District of Columbia that does not and will not have any material assets or operations shall become a co-issuer of the Notes pursuant to supplemental indentures duly executed by the Trustee; (2) the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Issuer under the Indenture and the Notes pursuant to documents in such form as are reasonably satisfactory to the Trustee; and (3) immediately after such transaction, no Default or Event of Default exists. In addition, the Issuer may not, directly or indirectly, lease all or substantially all of its and its Subsidiaries’ properties or assets, taken as a whole, in one or more related transactions, to any other Person. This “Merger, Consolidation or Sale of Assets” covenant will not apply to: (1) a merger of the Issuer with an Affiliate solely for the purpose of reincorporating the Issuer in another jurisdiction or forming a direct holding company of the Issuer; and (2) any sale, transfer, assignment, conveyance, lease or other disposition of assets between or among the Issuer and its Subsidiaries, including by way of merger or consolidation. A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Issuer or a Guarantor, unless immediately after giving effect to that transaction, no Default or Event of Default exists. Additional Guarantees The Issuer will not permit any Subsidiary that is not a Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of (i) any indebtedness under the Senior Revolving Credit Facilities Agreement or (ii) any Public Debt of the Issuer or any Guarantor (other than the Notes), in each case in excess of $120.0 million (or the equivalent in other currencies) in aggregate principal amount, unless: (a) such Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a Guarantee of payment of the Notes by such Subsidiary on the same terms as the guarantee of such indebtedness; and (b) with respect to any guarantee of subordinated indebtedness by such Subsidiary, any such guarantee shall be subordinated to such Subsidiary’s Guarantee with respect to the Notes at least to the same extent as such subordinated debt is subordinated to the Notes. In addition, the Issuer shall cause each Material Subsidiary that is not a Guarantor (as determined based on the audited annual reports referred to below) and which has become a borrower under the Senior Revolving Credit Facilities Agreement or has guaranteed any indebtedness under the Senior Revolving Credit Facilities
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Agreement, to execute and deliver a supplemental indenture or joinder, as applicable, providing for such Material Subsidiary’s Guarantee on the same terms and conditions as those applicable to the Guarantors under the Indenture, within 30 days of delivery of the Issuer’s audited annual reports to the Trustee pursuant to the Indenture, and will deliver to the Trustee an opinion of counsel that such supplemental indenture or joinder, as applicable, has been duly authorized, executed and delivered and constitute a legally valid and enforceable obligation (subject to customary qualifications and exceptions). Thereafter, such Material Subsidiary will be a Guarantor with respect to the Notes until such Material Subsidiary’s Guarantee with respect to the Notes is released in accordance with the Indenture. If on any date following the Issue Date, the Notes have achieved Investment Grade Status and no Default or Event of Default has occurred and is continuing (a “Suspension Event”), then, beginning on that day and continuing until such time, if any, at which the Notes cease to have Investment Grade Status (the “Reversion Date”), the immediately preceding paragraphs will cease to be effective and will not be applicable to the Issuer and its Subsidiaries. This covenant and any related default provisions will again apply according to its terms from the first day on which a Suspension Event ceases to be in effect. Such covenants will not, however, be of any effect with regard to actions of the Issuer properly taken during the continuance of the Suspension Event, and no action taken prior to the Reversion Date will constitute a Default or Event of Default. The Indenture will also permit, without causing a Default or Event of Default, the Issuer or any of its Subsidiaries to honor any contractual commitments or take actions in the future after any date on which the Notes cease to have an Investment Grade Status as long as the contractual commitments were entered into during the Suspension Event and not in anticipation of the Notes no longer having an Investment Grade Status. There can be no assurance that the Notes will ever achieve or maintain an Investment Grade Status. The obligations of each additional Guarantor under its Guarantee may be limited to an amount not to exceed the maximum amount that can be guaranteed by such Guarantor without resulting in its obligations under its Guarantee being voidable or unenforceable under applicable law (including those relating to fraudulent conveyance or transfer, corporate benefit or purpose, financial assistance, capital maintenance, voidable preference, thin capitalization or guidance and coordination or affecting the rights of creditors generally) or the maximum amount otherwise permitted by applicable law. Notwithstanding the foregoing, the Issuer shall not be obligated to cause such Subsidiary to guarantee the Notes to the extent that the granting of such Guarantee could give rise to or result in: (1) any breach or violation of Applicable Law (including those relating to fraudulent conveyance or transfer, corporate benefit or purpose, financial assistance, capital maintenance, voidable preference, thin capitalization or guidance and coordination or affecting the rights of creditors generally); (2) any risk or liability for the officers, directors or (except in the case of a Subsidiary that is a partnership) shareholders of such Subsidiary (or, in the case of a Subsidiary that is a partnership, directors or shareholders of the partners of such partnership); or (3) significant costs, expenses, liability or obligations (including with respect to any Taxes) directly associated with the granting of such Guarantee (but excluding any reasonable guarantee or similar fee payable to the Issuer or a Guarantor) which are disproportionate to the benefit obtained by the holders of Notes from such Guarantee in the good faith judgment of a responsible officer of the Issuer; provided, however, that the Issuer will procure that the relevant Subsidiary becomes a Guarantor at such time as such restriction would no longer apply to the providing of the Guarantee or no longer would prohibit such Subsidiary from becoming a Guarantor (or prevent the Issuer from causing such Subsidiary to become a Guarantor). Impairment of Security Interests The Issuer shall not, and shall not permit any Guarantor to, take or omit to take any action that would have the result of materially impairing the Security Interests (subject to the paragraph below, the incurrence of Permitted Liens with respect to the Collateral shall not be deemed to materially impair the Security Interests with respect to the Collateral) and the Issuer shall not, and shall not permit any Guarantor to, grant to any Person other than the Security Agent, for the benefit of the Trustee and the holders of Notes and the other beneficiaries described in the Security Documents and the Intercreditor Agreement or any Additional Intercreditor Agreement, any interest whatsoever in any of the Collateral (except Permitted Liens). Notwithstanding the foregoing (a) nothing in this covenant shall restrict the discharge and release of any Security Interest in accordance with the Indenture and the Intercreditor Agreement or any Additional Intercreditor Agreement and (b) the Security Interests and the related Security Documents may be amended, extended, renewed, restated, supplemented or otherwise modified or released (followed by an immediate
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retaking of a lien of at least equivalent ranking over the same assets) if, (except with respect to any amendments, extensions, renewals, restatements, modifications discharge or release in accordance with the Indenture, the incurrence of Permitted Liens or any action expressly permitted by the Indenture, the Intercreditor Agreement or any Additional Intercreditor Agreement) contemporaneously with any such action, the Issuer delivers to the Trustee and the Security Agent, either (1) a solvency opinion from an independent financial advisor, accounting firm, appraiser or investment bank of international standing which confirms the solvency of the Issuer and its Subsidiaries, taken as a whole, after giving effect to any transactions related to such amendment, extension, renewal, restatement, replacement, supplement, modification or release (followed by an immediate retaking of a lien of at least equivalent ranking over the same assets), (2) a certificate from the board of directors or officer of the relevant Person which confirms the solvency of the Person granting such Security Interest after giving effect to any transactions related to such amendment, extension, renewal, restatement, replacement, supplement, modification or release or (3) an opinion of counsel confirming that, after giving effect to any transactions related to such amendment, extension, renewal, restatement, replacement, supplement, modification or release (followed by an immediate retaking of a lien of at least equivalent ranking over the same assets), the lien created under the applicable Security Document, so amended, extended, renewed, restated, supplemented, modified or released and replaced is a valid lien not otherwise subject to any limitation, imperfection or new hardening period, in equity or at law, that such lien was not otherwise subject to immediately prior to such amendment, extension, renewal, restatement, supplement, modification or replacement. At the direction of the Issuer and without the consent of the holders of Notes, the Security Agent may from time to time enter into one or more amendments to the Security Documents or enter into additional or supplemental Security Documents to: (i) cure any ambiguity, omission, defect or inconsistency therein, (ii) add to the Collateral or (iii) make any other change thereto that does not adversely affect the rights of the holders of Notes in any material respect. In the event that the Issuer complies with the requirements of this covenant, the Trustee and the Security Agent shall (subject to customary protections and indemnifications) consent to such amendment, extension, renewal, restatement, supplement, modification or release and replacement without the need for instructions from the holders of Notes. Additional Intercreditor Agreements The Indenture will provide that, at the request of the Issuer and without the consent of the holders of Notes, in connection with the incurrence by the Issuer or the Guarantors of indebtedness permitted under the Indenture, the Issuer, the Guarantors, the Trustee and the Security Agent shall enter into with the holders of such indebtedness (or their duly authorized representatives) an intercreditor agreement (an “Additional Intercreditor Agreement”) or a restatement, amendment or other modification of the Intercreditor Agreement, in each case on substantially the same terms as the Intercreditor Agreement (or terms not materially less favorable to the holders of Notes), including containing substantially the same terms with respect to release of Guarantees and priority and release of the Security Interests; provided, however, that such Additional Intercreditor Agreement will not impose any personal obligations on the Trustee or Security Agent or, in the opinion of the Trustee or Security Agent, as applicable, adversely affect the rights, duties, liabilities or immunities of the Trustee or Security Agent under the Indenture or the Intercreditor Agreement. The Indenture also will provide that, at the written direction of the Issuer and without the consent of the holders of Notes, the Trustee and the Security Agent shall from time to time enter into one or more amendments to any Intercreditor Agreement to: (1) cure any ambiguity, omission, defect or inconsistency of any such agreement, (2) increase the amount or types of indebtedness covered by any such agreement that may be incurred by the Issuer or a Guarantor that is subject to any such agreement (including with respect to any Intercreditor Agreement or Additional Intercreditor Agreement, the addition of provisions relating to new indebtedness ranking junior or pari passu in right of payment to the Notes), (3) add Guarantors to the Intercreditor Agreement or an Additional Intercreditor Agreement, (4) further secure the Notes, (5) make provision for equal and ratable security interests and pledges with respect to the Collateral to secure Additional Notes, (6) implement any Permitted Liens (including junior liens, pari passu liens and liens benefiting from priority rights of turnover in respect of proceeds of enforcement), (7) amend the Intercreditor Agreement or any Additional Intercreditor Agreement in accordance with the terms thereof or (8) make any other change to any such agreement that does not adversely affect the holders of Notes in any material respect.
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The Issuer shall not otherwise direct the Trustee or the Security Agent to enter into any amendment to the Intercreditor Agreement or any Additional Intercreditor Agreement without the consent of the holders of the majority in aggregate principal amount of the Notes then outstanding, except as otherwise permitted below under “—Amendment, Supplement and Waiver” and as permitted under the Intercreditor Agreement or any Additional Intercreditor Agreement and the Issuer may only direct the Trustee and the Security Agent to enter into any amendment to the extent such amendment does not impose any personal obligations on the Trustee or Security Agent or, in the opinion of the Trustee or Security Agent, adversely affect their respective rights, duties, liabilities or immunities under the Indenture or the Intercreditor Agreement or any Additional Intercreditor Agreement. The Indenture shall also provide that, in relation to the Intercreditor Agreement or any Additional Intercreditor Agreement, the Trustee (and Security Agent, if applicable) shall consent on behalf of the holders of Notes to the payment, repayment, purchase, repurchase, defeasance, acquisition, retirement or redemption of any obligations subordinated to the Notes or the Guarantees thereby. The Indenture also will provide that each holder of Notes, by accepting a Note, shall be deemed to have agreed to and accepted the terms and conditions of the Intercreditor Agreement and any Additional Intercreditor Agreement (whether then entered into or entered into in the future pursuant to the provisions described herein) and to have directed the Trustee or Security Agent, as applicable, to enter into (or accede to) the Intercreditor Agreement and any such Additional Intercreditor Agreement. Reports Whether or not required by the SEC’s rules and regulations, so long as any Notes are outstanding, the Issuer will furnish to the Trustee and the holders of Notes, within the time periods (including any extensions thereof) specified in the SEC’s rules and regulations: (1) all annual reports of the Issuer that would be required to be filed with the SEC on Form 20-F if the Issuer were required to file such reports; and (2) all quarterly and current reports of the Issuer that would be required to be furnished with the SEC on Form 6-K if the Issuer were required to furnish such reports. All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 20-F will include a report on the Issuer’s consolidated financial statements by the Issuer’s independent registered public accounting firm. To the extent such filings are made with the SEC, the reports will be deemed to have been furnished to the Trustee and holders of Notes. The Issuer agrees that it will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Issuer’s filings for any reason, the Issuer will (i) post (or cause to be posted) the reports referred to in the first paragraph of this covenant on its website with no password protection within the time periods that would apply if the Issuer were required to file those reports with the SEC, (ii) not later than ten (10) Business Days after the time the Issuer posts its quarterly and annual reports on its website, hold (or cause to be held) a quarterly conference call to discuss the information contained in such reports and (iii) no fewer than two (2) Business Days prior to the date of the conference call required to be held in accordance with clause (ii) above, issue (or cause to be issued) a news release to appropriate wire services announcing the time and date of such conference call and either including all information necessary to access the call or directing the holders or beneficial owners of, and prospective investors in, the Notes and securities analysts and market makers to contact an individual at the Issuer (for whom contact information shall be provided in such news release) to obtain the information on how to access such conference call. In addition, the Issuer agrees that, for so long as any Notes remain outstanding, at any time it is not required to file the reports required by the preceding paragraphs with the SEC, it will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act.
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Events of Default and Remedies Each of the following is an “Event of Default” with respect to the Notes: (1) default for 30 days in the payment when due of interest on the Notes; (2) default in payment when due of the principal of, or premium, if any, on the Notes; (3) failure by the Issuer or a Guarantor to comply with any covenant in the Indenture (other than a default specified in clause (1) or (2) above) for 60 days after written notice by the Trustee or holders of at least 25% in principal amount of the Notes; (4) default under any document evidencing any indebtedness for borrowed money by the Issuer or any Guarantor, whether such indebtedness now exists or is created after the Issue Date, if that default: (a) is caused by a failure to pay principal when due at final (and not any interim) maturity on or prior to the expiration of any grace period provided in such indebtedness (a “Payment Default”); or (b) results in the acceleration of such indebtedness prior to its express maturity (without such acceleration having been rescinded, annulled or otherwise cured), and, in each case, the principal amount of any such indebtedness, together with the principal amount of any other such indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated (without such acceleration having been rescinded, annulled or otherwise cured), aggregates $120.0 million (or the equivalent in other currencies) or more; provided, however, that this clause (4) shall not apply to (i) secured indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such indebtedness and (ii) any indebtedness that is required to be converted into Qualifying Equity Interests upon the occurrence of certain designated events so long as no payments in cash or otherwise are required to be made in accordance with such conversion); (5) failure by the Issuer or any Significant Subsidiary or group of Guarantors that taken as a whole would constitute a Significant Subsidiary to pay final judgments, orders or decrees (not subject to appeal) entered by a court or courts of competent jurisdiction aggregating in excess of $120.0 million (or the equivalent in other currencies) (exclusive of any amounts covered by insurance policies issued by reputable and creditworthy insurance companies), which judgments shall not have been discharged or waived and there shall have been a period of 60 consecutive days or more during which a stay of enforcement of such judgment, order or decree (by reason of pending appeal, waiver or otherwise) shall not have been in effect; (6) the Security Interests purported to be created under any Security Document (other than in accordance with the terms of the relevant Security Document, the Intercreditor Agreement, any Additional Intercreditor Agreement and the Indenture) with respect to Collateral having a Fair Market Value in excess of $30.0 million (or the equivalent in other currencies) will, at any time, cease to be in full force and effect and constitute a valid and perfected security interest or pledge with the priority required by the applicable Security Document, the Intercreditor Agreement or any Additional Intercreditor Agreement for any reason other than the satisfaction in full of all obligations under the Indenture and discharge of the Indenture or in accordance with the terms of the Intercreditor Agreement, any Additional Intercreditor Agreement or the Security Documents or any Security Interest purported to be created under any Security Document is declared invalid or unenforceable or the Issuer or any Guarantor granting such Security Interest asserts, in any pleading in any court of competent jurisdiction, that any such Security Interest is invalid or unenforceable and such failure to be in full force and effect or such assertion has continued uncured for a period of 15 days; (7) except as permitted by the Indenture, any Guarantee of any Guarantor (or any group of Guarantors) that constitutes a Significant Subsidiary shall be held in any final and non-appealable judicial proceeding to be unenforceable or invalid or shall cease for any reason (other than in accordance with its terms) to be in full force and effect or any Guarantor (or any group of Guarantors) that constitutes a Significant Subsidiary, or any Person acting on behalf of any Guarantor (or any group of Guarantors)
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that constitutes a Significant Subsidiary, shall deny or disaffirm in writing its or their obligations under its or their Guarantees; and (8) certain events of bankruptcy, insolvency or court protection of the Issuer or a Significant Subsidiary or group of Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer and its Subsidiaries), would constitute a Significant Subsidiary. In the case of an Event of Default pursuant to clause (8) of the previous paragraph, the Notes that are outstanding will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of such Notes that are outstanding may declare all the Notes to be due and payable immediately. Subject to certain limitations, holders of a majority in principal amount of the Notes that are then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of the Notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal or interest. In case an Event of Default occurs and is continuing under the Indenture, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any holders of the Notes unless such holders have offered to the Trustee indemnity or security satisfactory to the Trustee against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no holder of a Note may pursue any remedy with respect to the Indenture unless: (1) such holder has previously given the Trustee notice that an Event of Default is continuing; (2) holders of at least 25% in aggregate principal amount of the Notes that are then outstanding have requested the Trustee to pursue the remedy; (3) such holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and (5) holders of a majority in aggregate principal amount of the Notes that are then outstanding have not given the Trustee a direction inconsistent with such request within such 60-day period. The holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may, on behalf of the holders of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, such series of Notes. The Issuer is required to deliver to the Trustee within 120 days of the end of each fiscal year, a statement regarding compliance with the Indenture. Upon becoming aware of any Default or Event of Default, the Issuer is required to deliver to the Trustee a statement specifying such Default or Event of Default. No Personal Liability of Directors, Officers, Employees and Stockholders No director, officer, employee, incorporator, shareholder or stockholder of the Issuer or any Guarantor, as such, will have any liability for any obligations of the Issuer or the Guarantors under the Notes, the Indenture or the Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the sale of the Notes. Such waiver may not be effective to waive liabilities under the U.S. federal securities laws and it is the view of the SEC that such a waiver is against public policy.
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Legal Defeasance and Covenant Defeasance The Issuer may, at its option and at any time, elect to have all of its obligations discharged with respect to all or any series of Notes that are outstanding and all obligations of the Guarantors of such Notes discharged with respect to their Guarantees (“Legal Defeasance”) except for: (1) the rights of holders of the applicable series of Notes that are then outstanding to receive payments in respect of the principal of, or interest or premium on such Notes when such payments are due from the trust referred to below; (2) the Issuer’s obligations with respect to the applicable series of Notes concerning issuing temporary Notes, certificated Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust; (3) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s and the Guarantors’ obligations in connection therewith; and (4) the Legal Defeasance provisions of the Indenture. In addition, the Issuer may, at its option and at any time, elect to have the obligations of the Issuer and the Guarantors released with respect to certain covenants (including the Issuer’s obligation to make Change of Control Offers) that are described in the Indenture (“Covenant Defeasance”) and thereafter any failure to comply with those covenants will not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under “—Events of Default and Remedies” will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes, cash in euro or euro-denominated European Government Obligations or a combination thereof, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants to pay the principal of, or interest and premium on such Notes that are then outstanding on the Stated Maturity or on the applicable redemption date, as the case may be, and the Issuer must specify whether such Notes are being defeased to maturity or to a particular redemption date; (2) in the case of Legal Defeasance, the Issuer has delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that (a) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the holders of the Notes that are then outstanding will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, the Issuer has delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the holders of the Notes that are then outstanding will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default with respect to the Notes has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which
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the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound; (6) the Issuer must deliver to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuer with the intent of preferring the holders of the Notes over the other creditors of the Issuer with the intent of defeating, hindering, delaying or defrauding creditors of the Issuer or others; and (7) the Issuer must deliver to the Trustee an Officer’s Certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Amendment, Supplement and Waiver Except as provided in the next two succeeding paragraphs, the Indenture, the Notes, the Guarantees, the Intercreditor Agreement, any Additional Intercreditor Agreement or any Security Document may be amended or supplemented with the consent of the holders of a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and any existing default or compliance with any provision of the Indenture, the Notes or the Guarantees may be waived with the consent of the holders of a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). Unless consented to by the holders of at least 90% of the aggregate principal amount of the Notes outstanding affected (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), without the consent of each holder of Notes affected, an amendment, supplement or waiver may not (with respect to any Notes held by a non-consenting holder): (1) reduce the principal amount of any Notes whose holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or extend the fixed maturity of such Notes or alter the provisions with respect to the redemption of such Notes (other than provisions relating to the covenant described above under the caption “—Change of Control” and provisions relating to the number of days of notice to be given in the event of a redemption); (3) reduce the rate of or change the stated time for payment of interest on such Notes; (4) waive a Default or Event of Default in the payment of principal of, or interest or premium on such Notes (except pursuant to a rescission of acceleration of such Notes by the holders of a majority in aggregate principal amount of such Notes and a waiver of the payment default that resulted from such acceleration); (5) make such Notes payable in currency other than that stated in such Notes; (6) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of holders of such Notes to receive payments of principal of, or interest or premium on such Notes; (7) waive a redemption payment with respect to any such Notes (other than a payment required by the covenant described above under the caption “—Change of Control”); (8) impair the right of any holder to receive payment of principal of and interest or Additional Amounts, if any, on such Notes on or after the due dates therefor or to institute suit for the enforcement of any such payment on or with respect to such Notes; (9) make any change in the provision of the Indenture described under “——Withholding Taxes” that adversely affects the right of any holder of such Notes in any material respect or amends the terms of such Notes in a way that would result in a loss of an exemption from any of the Taxes described thereunder or an exemption from any obligation to withhold or deduct Taxes so described thereunder unless the Issuer agrees to pay Additional Amounts, if any, in respect thereof;
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(10) release all or substantially all of the Security Interests other than in accordance with the terms of the Security Documents, the Intercreditor Agreement, any applicable Additional Intercreditor Agreement or the Indenture; (11) release any Guarantor from any of its obligations under its Guarantee or the Indenture, except in accordance with the terms of the Indenture; or (12) make any change in the preceding amendment and waiver provisions. Notwithstanding the preceding, without the consent of any holder of Notes, the Issuer, the Guarantors and the Trustee may amend or supplement the Indenture, such Notes, the Guarantees, the Intercreditor Agreement, any Additional Intercreditor Agreement or any Security Document: (1) to cure any ambiguity, omission, defect, error or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of the certificated Notes; (3) to provide for the assumption of the Issuer’s or a Guarantor’s obligations to the holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s or such Guarantor’s assets; (4) to make any change that would provide any additional rights or benefits to the holders of Notes or that does not adversely affect the legal rights under the Indenture of any such holder; (5) to conform the text of the Indenture or the Notes to any provision of this “Description of the Notes” to the extent that such provision in this “Description of the Notes” was intended to be a verbatim or substantially verbatim recitation of a provision of the Indenture, such Notes or the Guarantees; (6) to release any Guarantee in accordance with the terms of the Indenture; (7) to evidence and provide for the acceptance and appointment under the Indenture of a successor trustee or security agent pursuant to the requirements thereof; (8) to the extent necessary to grant a Security Interest; provided, however, that the granting of such Security Interest is not prohibited by the Indenture, the Intercreditor Agreement or any Additional Intercreditor Agreement and the covenant described under “—Certain Covenants—Impairment of Security Interests” is complied with; (9) make any change to the extent permitted by the covenant described under “—Certain Covenants— Additional Intercreditor Amendments;” (10) to provide for the issuance of additional series of Notes in accordance with the limitations set forth in the Indenture; or (11) to allow any Guarantor to execute a supplemental indenture or a joinder, as applicable, with respect to the Notes. For the avoidance of doubt, no amendment to or deletion of, or actions taken in compliance with, the covenants described herein (including under “Certain Covenants”) shall be deemed to impair or affect any rights of holders of Notes to receive payment of principal of, or premium, if any, or interest on, the Notes. In formulating its decision on such matters, the Trustee shall be entitled to require and rely absolutely on such evidence as it deems appropriate, including Officer’s Certificates and opinions of counsel. The consent of the holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. A consent to any amendment or waiver under the Indenture by any holder of Notes given in connection with a tender of such holder’s Notes will not be rendered invalid by such tender. For so long as the Notes are listed on Euronext Dublin and the rules of such exchange so require, the Issuer will publish notice of any amendment, supplement and waiver in Ireland in a daily newspaper with general
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circulation in Ireland (which is expected to be the Irish Times). Such notice of any amendment, supplement and waiver may instead be published on the website of Euronext Dublin (www.ise.ie). Acts by Holders In determining whether the holders of the required principal amount of the Notes have concurred in any direction, waiver or consent, the Indenture will provide that the Notes owned by the Issuer or by any Person directly or indirectly controlled, or controlled by, or under direct or indirect common control with, the Issuer will be disregarded and deemed not to be outstanding. Satisfaction and Discharge The Indenture will be discharged and will cease to be of further effect as to any series of Notes issued thereunder, when: (1) either: (a) all Notes of such series that have been authenticated, except lost, stolen or destroyed Notes of such series that have been replaced or paid and Notes of such series for whose payment money has been deposited in trust and thereafter repaid to the Issuer, have been delivered to the Trustee for cancellation; or (b) all Notes of such series that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the holders of such series of Notes, cash in euro or euro-denominated European Government Obligations or a combination thereof, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on such series of Notes not delivered to the Trustee for cancellation for principal, premium and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default under the Indenture has occurred and is continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound; (3) the Issuer or any Guarantor has paid or caused to be paid all sums payable by it under the Indenture; and (4) the Issuer has delivered irrevocable written instructions to the Trustee under the Indenture to apply the deposited money toward the payment of such series of Notes at maturity or the redemption date, as the case may be. In addition, the Issuer must deliver an Officer’s Certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Listing Application has been made to list the Notes on the Official List of Euronext Dublin and to admit the Notes to trading on the Global Exchange Market of Euronext Dublin, which is the exchange regulated market of Euronext Dublin. The Global Exchange Market is not a regulated market pursuant to the provisions of Directive 2014/65/EU. The Issuer will use its commercially reasonable efforts, for so long as the Notes are outstanding, to maintain the listing of such Notes on the Official List of Euronext Dublin or, if at any time the Issuer determines that it will not obtain or maintain such listing on the Official List of Euronext Dublin, it will use its commercially reasonable efforts to obtain (prior to delisting) and thereafter maintain a listing of the Notes on another “recognised stock exchange” as defined in Section 1005 of the Income Tax Act 2007 of the United Kingdom.
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Notices For so long as any of the Notes are listed on Euronext Dublin and the rules of Euronext Dublin so require, notices of the Issuer with respect to the Notes will be published on the website of Euronext Dublin (www.ise.ie), or, to the extent permitted or required by the rules of Euronext Dublin, such notices may instead be published in a daily newspaper with general circulation in Ireland (which is expected to be the Irish Times) or if, in the opinion of the Issuer such publication is not practicable, in an English language newspaper having general circulation in Europe. In addition, for so long as any Notes are represented by Global Notes, all notices to holders of Notes will be delivered by or on behalf of the Issuer to Euroclear and Clearstream, as applicable. Each such notice shall be deemed to have been given on the date of such publication or, if published more than once on different dates, on the first date on which publication is made; provided, however, that, if notices are mailed, such notice shall be deemed to have been given on the later of such publication and the seventh day after being so mailed. Any notice or communication mailed to a holder shall be mailed to such holder by first-class mail or other equivalent means and shall be sufficiently given to such holder if so mailed within the time prescribed. Failure to mail a notice or communication to a holder or any defect in it shall not affect its sufficiency with respect to other holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. If a notice or communication is given in via Euroclear or Clearstream, it is duly given on the day the notice is given to Euroclear or Clearstream. Judgment Currency Any payment on account of an amount that is payable in euros (the “Required Currency”), which is made to or for the account of any holder of Notes or the Trustee in lawful currency of any other jurisdiction (the “Judgment Currency”), whether as a result of any judgment or order or the enforcement thereof or the liquidation of the Issuer or a Guarantor, shall constitute a discharge of the Issuer or such Guarantor’s obligation under the Indenture and the Notes or the Guarantee, as the case may be, only to the extent of the amount of the Required Currency with such holder or the Trustee or its designee, as the case may be, could purchase in the London foreign exchange markets with the amount of the Judgment Currency in accordance with normal banking procedures at the rate of exchange prevailing on the first (1st) Business Day following receipt of the payment in the Judgment Currency. If the amount of the Required Currency that could be so purchased is less than the amount of the Required Currency originally due to such holder or the Trustee, as the case may be, then the Issuer and the Guarantors, jointly and severally, shall indemnify and hold harmless the holder or the Trustee, as the case may be, from and against all loss or damage arising out of, or as a result of, such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in the Indenture, the Notes or the Guarantee, as the case may be, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any holder or the Trustee from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order. Concerning the Trustee If the Trustee becomes a creditor of the Issuer or any Guarantor, the Indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions. The holders of a majority in principal amount of the Notes that are outstanding will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default occurs and is continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of such person’s own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any holder of Notes, unless such holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.
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Prescription Claims against the Issuer or any Guarantor for the payment of principal or Additional Amounts, if any, on the Notes will be prescribed ten years after the applicable due date for payment thereof. Claims against the Issuer or any Guarantor for the payment of interest on the Notes will be prescribed six years after the applicable due date for payment of interest. Governing Law The Indenture, the Notes and the Guarantees will each be governed by, and construed in accordance with, the laws of the State of New York. Consent to Jurisdiction and Service of Process The Issuer and the Guarantors will each irrevocably submit to the jurisdiction of any New York state or U.S. federal court located in The Borough of Manhattan, City of New York, State of New York in relation to any legal action or proceeding (i) arising out of, related to or in connection with the Indenture, the Notes and the Guarantees and (ii) arising under any U.S. federal or state securities laws. The Issuer and each Guarantor will each appoint an agent for service of process in any such action or proceeding. Enforceability of Judgments A substantial portion of the assets of the Issuer and the Guarantors are outside the United States, any judgment obtained in the United States against the Issuer or any Guarantor outside of the United States, including judgments with respect to the payment of principal, premium, interest, Additional Amounts and any redemption price and any purchase price with respect to the Notes, may not be collectable within the United States. Certain Definitions “2019 Notes” refers to the $500,000,000 7.500% Senior Secured Notes due June 15, 2019 issued by IGT US HoldCo (of which $144,303,000 in principal was outstanding as of March 31, 2018); “2020 5.625% Notes” refers to the $600,000,000 5.625% Senior Secured Notes due February 15, 2020 issued by the Issuer; “2020 4.125% Notes” refers to the €700,000,000 4.125% Senior Secured Notes due February 15, 2020 issued by the Issuer; “2020 4.750% Notes” refers to the €500,000,000 4.750% Senior Secured Notes due March 5, 2020 issued by the Issuer with an initial coupon of 3.500%; “2020 5.500% Notes” refers to the $300,000,000 5.500% Senior Secured Notes due June 15, 2020 issued by IGT US HoldCo (of which $124,143,000 in principal was outstanding as of March 31, 2018); “2022 Notes” refers to the $1,500,000,000 6.250% Senior Secured Notes due February 15, 2022 issued by the Issuer; “2023 4.750% Notes” refers to the €850,000,000 4.750% Senior Secured Notes due February 15, 2023 issued by the Issuer; “2023 5.350% Notes” refers to the $500,000,000 5.350% Senior Secured Notes due October 15, 2023 issued by IGT US HoldCo (of which $60,567,000 in principal was outstanding as of March 31, 2018); “2025 Notes” refers to the $1,100,000,000 6.500% Senior Secured Notes due February 15, 2025 issued by the Issuer; “Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that Beneficial Ownership of ten percent or
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more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have corresponding meanings. “Applicable Law” shall mean, as to any Person, any statute, ordinance, law, treaty, rule or regulation or any determination, ruling or other directive by and from an arbitrator or a court or other governmental authority, in each case, applicable to or binding on such Person or any of its property or assets or to which such Person or any of its property is subject. “Applicable Premium” means, with respect to any Note on any redemption date, the excess of: (1) the present value at such redemption date of (i) the principal amount of such Note plus (ii) all required interest payments due on such Note through January 15, 2024 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Bund Rate as of such redemption date plus 50 basis points; over (2) the principal amount of the Note, if greater, as calculated by the Issuer or other party appointed by it for this purpose. “Authorized Officer” shall mean, with respect to (i) delivering an Officer’s Certificates pursuant to the Indenture, the chief executive officer, the president, the chief financial officer, the treasurer, the assistant treasurer, the principal accounting officer or any other executive of the Issuer having substantially the same responsibilities as the aforementioned officers, and (ii) any other matter in connection with the Indenture, the chief executive officer, chief financial officer, treasurer, the assistant treasurer, general counsel or a responsible financial or accounting officer or any other executive of the Issuer having substantially the same responsibilities as the aforementioned officers. “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the U.S. Exchange Act. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning. “Board of Directors” means: (1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; (3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and (4) with respect to any other Person, the board or committee of such Person serving a similar function. “Bund Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity as of such date of the Comparable German Bund Issue, assuming a price for the applicable Comparable German Bund Issue (expressed as a percentage of its principal amount) equal to the Comparable German Bund Price for such redemption date, where: (1) “Comparable German Bund Issue” means the German Bundesanleihe security selected by any Reference German Bund Dealer as having a fixed maturity most nearly equal to the period from such redemption date to January 15, 2024 that would be utilized at the time of selection and in accordance with customary financial practice, in pricing new issues of euro-denominated corporate debt securities in a principal amount approximately equal to the then outstanding principal amount of the Notes and of a maturity most nearly equal to January 15, 2024; provided, however, that, if the period from such redemption date to January 15, 2024 is not equal to the fixed maturity of the German Bundesanleihe security selected by such Reference German Bund Dealer, the Bund Rate shall be determined by linear interpolation (calculated to the nearest one-twelfth of a year) from the yields of German Bundesanleihe securities for which such yields are given, except that if the period from such redemption date to January 15, 2024 is less than one year, a fixed maturity of one year shall be used;
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(2) “Comparable German Bund Price” means, with respect to any redemption date, the average of all Reference German Bund Dealer Quotations for such date (which, in any event, must include at least two (2) such quotations), after excluding the highest and lowest such Reference German Bund Dealer Quotations, or if the Issuer obtains fewer than four (4) such Reference German Bund Dealer Quotations, the average of all such quotations; (3) “Reference German Bund Dealer” means any dealer of German Bundesanleihe securities appointed by the Issuer in good faith; and (4) “Reference German Bund Dealer Quotations” means, with respect to each Reference German Bund Dealer and any redemption date, the average as determined by the Issuer in good faith of the bid and offered prices for the Comparable German Bund Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Issuer by such Reference German Bund Dealer at 3:30 p.m. Frankfurt, Germany, time on the third (3rd) Business Day preceding the redemption date. “Business Day” means a day (other than Saturday or Sunday) on which banks and financial institutions are open in New York and London. “Capital Stock” means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock. “Change of Control” means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its Subsidiaries, taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the U.S. Exchange Act) other than the Issuer or any of its Subsidiaries or a Permitted Holder or any Subsidiary of a Permitted Holder; (2) the consummation of any transaction (including without limitation, any merger or consolidation) the result of which is that any Person (including any “person” (as that term is used in Section 13(d)(3) of the U.S. Exchange Act)) other than a Permitted Holder becomes the “beneficial owner” as defined in Rules 13d-3 and 13d-5 under the U.S. Exchange Act of more than 50% of the Issuer’s outstanding Voting Stock, measured by voting power rather than number of shares; (3) the first day on which a majority of the members of the Board of Directors of the Issuer are not Continuing Directors; or (4) the adoption of a plan relating to the liquidation or dissolution of the Issuer (other than by way of merger or consolidation in compliance with the covenant described under the caption “Mergers, Consolidation or Sale of Assets.” “Continuing Director” means, as of any date of determination, any member of the Board of Directors of the Issuer who: (1) was a member of such Board of Directors immediately as of the Issue Date; or
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(2) was nominated for election or elected to such Board of Directors with the approval of (x) one or more Permitted Holders or (y) a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election. “Default” means any event, act or condition which with notice or lapse of time, or both, would (without cure or waiver hereunder) constitute an Event of Default. “Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the last date on which any outstanding Notes mature. “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). “Euro Equivalent” means, with respect to any monetary amount in a currency other than euro, at any time of determination thereof, the amount of euro obtained by converting such currency other than euro involved in such computation into euro at the spot rate for the purchase of euro with the applicable currency other than euro as published in the Financial Times in the “Currency Rates” section (or, if the Financial Times is no longer published, or if such information is no longer available in the Financial Times, such source as may be selected in good faith by the Issuer) on the date of such determination. Except as expressly provided otherwise, whenever it is necessary to determine whether the Issuer or any Guarantor has complied with any covenant or other provision in the Indenture or if there has occurred an Event of Default and an amount is expressed in a currency other than euro, such amount will be treated as the Euro Equivalent determined as of the date such amount is initially determined in such non-euro currency. “European Government Obligations” means direct obligations of, or obligations guaranteed by, a member state of the European Monetary Union as of the date of the Indenture, and the payment for which such member state of the European Monetary Union pledges its full faith and credit; provided, however, that such member state has a long-term government debt rating of “A1” or higher by Moody’s or “A+” or higher by S&P or the equivalent rating category of another internationally recognized rating agency. “Existing Notes” refers, collectively, to the 2020 4.750% Notes and the Existing Notes Issued in 2015. “Existing Notes Issued in 2015” refers, collectively, to the 2020 5.625% Notes, the 2020 4.125% Notes, the 2022 Notes, the 2023 4.750% Notes and the 2025 Notes. “Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in an arm’s length transaction not involving distress or necessity of either party, determined in good faith by an Authorized Officer of the Issuer (unless otherwise provided in the Indenture). “Guarantee” means the guarantee by each Guarantor of the Issuer’s obligations under the Indenture and the Notes, executed pursuant to the provisions of the Indenture. “Guarantor” means the Guarantors as of the Issue Date and any of the Issuer’s Subsidiaries that guarantees the Notes pursuant to the provisions of the Indenture, in each case, until the Guarantee of such Person has been released in accordance with the provisions of the Indenture. “IGT Canada Solutions ULC” means IGT Canada Solutions ULC, an unlimited liability company amalgamated under the laws of Nova Scotia and a direct, wholly owned subsidiary of the Issuer. “IGT Foreign Holdings Corporation” means IGT Foreign Holdings Corporation, a corporation incorporated under the laws of Delaware and an indirect, wholly owned subsidiary of the Issuer. “IGT Germany Gaming GmbH” means IGT Germany Gaming GmbH, a limited liability company (Gesellschaft mit beschränkter Haftung) incorporated under the laws of the Federal Republic of Germany and an indirect, wholly owned subsidiary of the Issuer. “IGT Global Solutions Corporation” means IGT Global Solutions Corporation, a corporation incorporated under the laws of Delaware and an indirect, wholly owned subsidiary of the Issuer.
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“IGT US HoldCo” means International Game Technology, a corporation incorporated under the laws of Nevada and a wholly owned subsidiary of the Issuer. “IGT US OpCo” means IGT, a corporation incorporated under the laws of Nevada and a wholly owned subsidiary of IGT US HoldCo. “Issue Date” means June 27, 2018. “Intercreditor Agreement” means the Intercreditor Agreement dated April 7, 2015 among the Issuer as Parent; NatWest Markets Plc (formerly known as The Royal Bank of Scotland plc) as Common Security Agent; NatWest Markets Plc (formerly known as The Royal Bank of Scotland plc) as Revolving Agent; the financial institutions named on the signature pages thereof as Revolving Lenders; the financial institutions named on the signature pages thereof as Revolving Swingline Lenders; NatWest Markets Plc (formerly known as The Royal Bank of Scotland plc) as Issuing Agent; KeyBank National Association as Swingline Agent; the financial institutions named on the signature pages thereof as Revolving Arrangers; Mediobanca — Banca di Credito Finanziario S.p.A. as Term Agent; the financial institutions named on the signature pages thereof as Term Lenders; the financial institutions named on the signature pages thereof as Term Arrangers; BNY Mellon Corporate Trustee Services Limited as 2018 GTECH Notes Senior Secured Notes Trustee; BNY Mellon Corporate Trustee Services Limited as 2020 GTECH Notes Senior Secured Notes Trustee; Wells Fargo Bank, National Association as IGT Senior Secured Notes Trustee; BNY Mellon Corporate Trustee Services Limited as the New Senior Secured Notes Trustee; the companies named on the signature pages thereof as Intra-Group Lenders; and the subsidiaries of the Issuer named on the signature pages thereof as Original Debtors, as amended, restated, modified, renewed or replaced in whole or in part from time to time. “Investment Grade Status” shall occur when the Notes receive both of the following: (1) a rating of “Baa3” or higher from Moody’s; and (2) a rating of “BBB–” or higher from S&P; or the equivalent of such rating by either such rating organization or, if no rating of Moody’s or S&P then exists, the equivalent of such rating by any other Nationally Recognized Statistical Ratings Organization. “Italian Guarantor” means Lottomatica Holding S.r.l., a società a responsabilità limitata organized under the laws of Italy and a direct, wholly owned subsidiary of the Issuer. “Material Subsidiary” means any Subsidiary of the Issuer that (i) has total assets (as determined on a consolidated basis in accordance with U.S. GAAP) of five percent (5%) or more of the Issuer’s consolidated total assets and (ii) has consolidated EBITDA of five percent (5%) or more of the Issuer’s consolidated EBITDA, in each case measured based on the Issuer’s audited annual reports delivered to the Trustee pursuant to the Indenture (the “Annual Report”). The determination of whether a Subsidiary is a Material Subsidiary shall be determined in good faith by a responsible financial or chief accounting officer of the Issuer (A) on the basis of management accounts based on the Annual Report and excluding intercompany balances, investments in subsidiaries and joint ventures and intangible assets and (B) by giving pro forma effect to any acquisitions or depositions of companies, division or lines of business since such balance sheet date or the start of such four quarter period, as applicable. “Moody’s” means Moody’s Investors Service, Inc. or any of its successors or assigns that is a Nationally Recognized Statistical Rating Organization. “Nationally Recognized Statistical Rating Organization” means a nationally recognized statistical organization within the meaning of Section 3(a)(62) under the U.S. Exchange Act. “Officer’s Certificate” means a certificate signed on behalf of the Issuer by an Authorized Officer of the Issuer that meets the requirements set forth in the Indenture. “Permitted Holders” means De Agostini S.p.A., its Subsidiaries or B&D Holding di Marco Drago e C.S.a.p.a. (“B&D Holding”) or any entity controlled by one or more of the same beneficial holders that directly or indirectly control B&D Holding on the Issue Date; provided, however, that for the purposes of this definition, an entity or B&D Holding shall be treated as being controlled, directly or indirectly, by any such holder(s) if the latter (whether by way of ownership of shares, proxy, contract, agency or otherwise) have or
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has, as applicable, the power to (i) appoint or remove all, or the majority, of its directors or other equivalent officers or (ii) direct its operating and financial policies. “Permitted Liens” means: (1) mortgages, security interests, charges, encumbrances, pledges and other liens securing indebtedness in an aggregate principal amount not to exceed the greater of (a) $150.0 million (or the equivalent in other currencies) and (b) one percent (1%) of Total Assets (determined at the time of incurrence of such indebtedness and without giving effect to subsequent changes); (2) if on the date of the incurrence of such mortgage, security interest, charge, encumbrance, pledge and other lien (a) the Notes have Investment Grade Status or (b) the obligations of the Issuer and its Subsidiaries under the Senior Revolving Credit Facilities Agreement are not required to be secured by security interests and pledges with respect to the Collateral, mortgages, security interests, charges, encumbrances, pledges and other liens securing indebtedness (other than Public Debt) in an amount not to exceed (x) the greater of (i) $1,000.0 million (or the equivalent in other currencies) and (ii) six percent (6%) of Total Assets (determined at the time of incurrence of such indebtedness and without giving effect to subsequent changes), less (y) the aggregate principal amount of indebtedness incurred by Subsidiaries of the Issuer which are not Guarantors pursuant to the covenant described under “Certain Covenants—Limitation on Non-Guarantor Subsidiary Indebtedness;” (3) mortgages, security interests, charges, encumbrances, pledges and other liens in favor of the Issuer or any of the Guarantors; (4) mortgages, security interests, charges, encumbrances, pledges and other liens granted for the benefit of (or to secure) the Notes (or the applicable Guarantee(s)); (5) liens arising by operation of law and in the ordinary course of business; (6) mortgages, security interests, charges, encumbrances, pledges and other liens on property (including Capital Stock), or property of a Person, existing at the time of acquisition of the property or the Person by the Issuer or any Subsidiary of the Issuer; provided, however, that such mortgages, security interests, charges, encumbrances, pledges and other liens were in existence (or were required to extend to such assets, including by way of an after-acquired property provision) prior to, and not incurred in contemplation of, or to finance, such acquisition; (7) liens arising by virtue of any statutory or common law provisions relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a depositary or financial institution; (8) liens for taxes, assessments or other governmental charges which are (a) being contested in good faith by appropriate proceedings; provided, however, that appropriate reserves required pursuant to U.S. GAAP have been made in respect thereof, or (b) not yet due and payable; (9) liens arising out of judgments, decrees, orders or awards not giving rise to an Event of Default and notices of lis pendens and associated rights so long as (a) any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree, order, award or notice have not been finally terminated or the period within which such proceedings may be initiated has not expired; (10) liens on specific items of inventory or other goods (and the proceeds thereof) of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created in the ordinary course of business of such Person to facilitate the purchase, shipment or storage of such inventory or other goods and liens securing or arising by reason of any netting or set-off arrangement entered into in the ordinary course of banking, hedging or other trading activities; (11) liens arising out of conditional sale, title retention, hire purchase, consignment or similar arrangements for the sale or supply of goods entered into in the ordinary course of business, and pledges of goods, the related documents of title or other related documents arising or created in the ordinary course of business or operations as liens only for indebtedness to a bank or financial institution directly relating to the goods or documents on or over which the pledge exists;
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(12) liens arising in connection with, and deposits made to secure, the payment and performance of bids, trade contracts (other than for borrowed money), contracts or concessions with respect to the business of the Issuer and its Subsidiaries, leases, statutory obligations, surety and appeal bonds, performance bonds, indemnity agreements in favor of issuers of bonds and other obligations of a like nature, and rights of usufruct and similar rights to continued use and possession of lottery equipment or other property in favor of lottery customers, in each case incurred in the ordinary course of business; (13) encumbrances and liens existing on the Issue Date; (14) security interests, charges, pledges and other liens securing hedging obligations not entered into for speculative purposes; and (15) mortgages, security interests, charges, encumbrances, pledges and other liens to secure refinancing indebtedness incurred to renew, refund, refinance, replace, exchange, defease or discharge other indebtedness (other than intercompany indebtedness); provided, however, that (a) the new mortgage, security interest, charge, encumbrance, pledge and other lien is limited to all or part of the same property and assets that secured the indebtedness being refinanced and (b) the indebtedness secured by the new mortgage, security interest, charge, encumbrance, pledge and other lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the indebtedness being refinanced and (y) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing. For the avoidance of doubt, the Security Interests with respect to indebtedness of the Issuer or a Guarantor will constitute “Permitted Liens” for purposes of the Indenture. “Person” means any individual, corporation, partnership, joint venture, association, joint-stock Company, trust, unincorporated organization, limited liability company or government or other entity. “Public Debt” means any debt securities consisting of bonds, debentures, notes or other similar instruments issued in (1) a public offering registered under the U.S. Securities Act or (2) a private placement to institutional investors that is underwritten for resale in accordance with Rule 144A under the U.S. Securities Act or Regulation S under the U.S. Securities Act, whether or not it includes registration rights entitling the holders of such securities to registration thereof with the SEC for public resale. “Qualifying Equity Interests” means Equity Interests of the Issuer other than Disqualified Stock. “S&P” means S&P Global Ratings, a division of S&P Global Inc., or any of its successors or assigns that is a Nationally Recognized Statistical Rating Organization. “SEC” means the U.S. Securities and Exchange Commission. “Senior Revolving Credit Facilities” means the $1,200,000,000 and €725,000,000 multicurrency revolving credit facilities available to the Issuer and certain of its Subsidiaries under the Senior Revolving Credit Facilities Agreement. “Senior Revolving Credit Facilities Agreement” means the senior facilities agreement dated November 4, 2014 for the $1,200,000,000 and €725,000,000 multicurrency revolving credit facilities among the Issuer, as the Parent and a Borrower; IGT Global Solutions Corporation, as a Borrower; J.P Morgan Limited and Mediobanca — Banca di Credito Finanziario S.p.A., as the Global Coordinators, Bookrunners and Mandated Lead Arrangers; the entities listed in Part III of Schedule 1 thereto, as the Bookrunners and Mandated Lead Arrangers; the entities listed in Part IV of Schedule 1 thereto, as the Mandated Lead Arrangers; the entities listed in Part V of Schedule 1 thereto, as the Arrangers; the financial institutions listed in Part II of Schedule 1 thereto, as the Original Lenders; NatWest Markets Plc, as the Agent; NatWest Markets Plc, as the Issuing Agent; and the other parties thereto, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. “Senior Term Loan Facility Agreement” means the senior facility agreement dated July 25, 2017 for the €1,500,000,000 senior term loan facility among the Issuer, as the Borrower; certain Subsidiaries of the Issuer listed in Part I of Schedule 1 thereto, as the Original Guarantors; Bank of America Merrill Lynch International Limited and Mediobanca — Banca di Credito Finanziario S.p.A., as the Global Coordinators, Bookrunners
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and Mandated Lead Arrangers; the entities listed in Part III of Schedule 1 thereto as the Bookrunners and Mandated Lead Arrangers; the entities listed in Part IV of Schedule 1 thereto as the Mandated Lead Arrangers; the financial institutions listed in Part II of Schedule 1, as the Original Lenders; and Mediobanca — Banca di Credito Finanziario S.p.A., as the Agent, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. “Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the U.S. Securities Act, as such Regulation is in effect on the Issue Date. “Stated Maturity” means, with respect to any installment of interest or principal on any series of indebtedness, the date on which the payment of interest or principal is scheduled to be paid in the documentation governing such indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. “Subsidiary” means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or shareholders’ or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). “Total Assets” means, as of any date of determination, the total consolidated assets of the Issuer and its Subsidiaries, determined in accordance with U.S. GAAP, as shown on the most recent publicly available balance sheet of the Issuer, and after giving pro forma effect to any acquisition or disposal of any property or assets consummated after the date of the applicable balance sheet and on or prior to the date of determination. “U.S. Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended. “U.S. GAAP” means accounting principles generally accepted in the United States. “U.S. Securities Act” means the U.S. Securities Act of 1933, as amended. “U.S. Trust Indenture Act” means the U.S. Trust Indenture Act of 1939, as amended. “Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person (including any other interest or participation in such Person that confers on another Person such entitlement).
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BOOK-ENTRY DELIVERY AND FORM General The Notes sold outside the United States to non-U.S. Persons pursuant to Regulation S will initially be represented by one or more global notes in registered form without interest coupons attached (the “Regulation S Global Notes”). The Regulation S Global Notes will be deposited on the Issue Date with a common depository and registered in the name of the nominee of the common depository for the accounts of Euroclear and Clearstream. The Notes sold within the United States to QIBs will initially be represented by one or more global notes in registered form without interest coupons attached (the “144A Global Notes” and, together with the Regulation S Global Notes, the “Global Notes”). The 144A Global Notes will be deposited, on the Issue Date, with a common depository and registered in the name of the nominee of the common depository for the accounts of Euroclear and Clearstream. Ownership of interests in the 144A Global Notes (the “144A Book-Entry Interests”) and ownership of interests in the Regulation S Global Notes (the “Regulation S Book-Entry Interests” and, together with 144A Book-Entry Interests, the “Book-Entry Interests”) will be limited to persons that have accounts with Euroclear or Clearstream or persons that may hold interests through such participants. Book-Entry Interests will be shown on, and transfers thereof will be effected only through, records maintained in Book-Entry form by Euroclear and Clearstream and their participants. The Book-Entry Interests in Global Notes will be issued only in denominations of €100,000 and in integral multiples of €1,000 in excess thereof. The Book-Entry Interests will not be held in definitive form. Instead, Euroclear or Clearstream will credit on their respective Book-Entry registration and transfer systems a participant’s account with the interest beneficially owned by such participant. The laws of some jurisdictions, including certain states of the United States, may require that certain purchasers of securities take physical delivery of such securities in definitive form. The foregoing limitations may impair the ability to own, transfer or pledge Book-Entry Interests. In addition, while the Notes are in global form, owners of interest in the Global Notes will not have the Notes registered in their names, will not receive physical delivery of the Notes in certificated form and will not be considered the registered owners or “holders” of Notes under the Indenture for any purpose. So long as the Notes are held in global form, the common depository for Euroclear or Clearstream (or its nominee), as applicable, will be considered the sole holder of Global Notes for all purposes under the Indenture. As such, participants must rely on the procedures of Euroclear or Clearstream, and indirect participants must rely on the procedures of Euroclear or Clearstream and the participants through which they own Book-Entry Interests to exercise any rights of holders under the Indenture. Neither we, the Guarantors, the Trustee nor any of our or the Guarantors’ respective agents will have any responsibility or be liable for any aspect of the records relating to the Book-Entry Interests. Issuance of Definitive Registered Notes Under the terms of the Indenture, owners of Book-Entry Interests will receive definitive Notes in registered form (the “Definitive Registered Notes”) only in the following circumstances:
if Euroclear or Clearstream notify us that it is unwilling or unable to continue to act as depository and a successor depository is not appointed by us within 120 days;
in whole, but not in part, if we or Euroclear or Clearstream so requests following an event of default under the Indenture, as applicable; or
if the owner of a Book-Entry Interest requests such exchange in writing delivered through Euroclear or Clearstream, as applicable, following an event of default under the Indenture. In such an event, we will issue Definitive Registered Notes, registered in the name or names and issued in any approved denominations, requested by or on behalf of Euroclear or Clearstream or us, as applicable (in accordance with their respective customary procedures and based upon directions received from participants reflecting the beneficial ownership of Book-Entry Interests), and such Definitive Registered Notes will bear
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the restrictive legend as provided in the Indenture, unless that legend is not required by the Indenture, or applicable law. To the extent permitted by law, we, the Guarantors, the Trustee, the Paying Agent and the Registrar (as defined in the Indenture) shall be entitled to treat the registered holder of any Global Note as the absolute owner thereof and no person will be liable for treating the registered holder as such. Ownership of the Global Notes will be evidenced through registration from time to time in the register maintained by the Registrar, and such registration is a means of evidencing title to the Notes. We will not impose any fees or other charges in respect of the Notes; however, owners of the Book-Entry Interests may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear or Clearstream, as applicable. Redemption of Global Notes In the event any Global Note, or any portion thereof, is redeemed, Euroclear or Clearstream, as applicable, will distribute the amount received by it in respect of the Global Note so redeemed to the owners of the Book- Entry Interests in such Global Note from the amount received by it in respect of the redemption of such Global Note. The redemption price payable in connection with the redemption of such Book-Entry Interests will be equal to the amount received by Euroclear or Clearstream, as applicable, in connection with the redemption of such Global Note (or any portion thereof). We understand that under existing practices of Euroclear and Clearstream, if fewer than all of the Notes are to be redeemed at any time, Euroclear and Clearstream will credit their respective participants’ accounts on a proportionate basis (with adjustments to prevent fractions) or by lot or on such other basis as they deem fair and appropriate; provided, however, that no Book-Entry Interest of less than €100,000, as applicable, principal amount at maturity, or less, may be redeemed in part. Payments on Global Notes Payments of any amounts owing in respect of the Global Notes (including principal, premium, interest, additional interest and additional amounts) will be made by us to the Paying Agent. The Paying Agent will, in turn, make such payments to the common depository for Euroclear and Clearstream which will distribute such payments to participants in accordance with their respective procedures. Under the terms of the Indenture, we and the Trustee will treat the registered holder of the Global Notes (i.e., Euroclear or Clearstream (or their respective nominees)) as the owner thereof for the purpose of receiving payments and for all other purposes. Consequently, neither we, the Trustee nor any of our or their respective agents has or will have any responsibility or liability for:
any aspects of the records of Euroclear, Clearstream or any participant or indirect participant relating to, or payments made on account of, a Book-Entry Interest, for any such payments made by Euroclear, Clearstream or any participant or indirect participant, or for maintaining, supervising or reviewing the records of Euroclear, Clearstream or any participant or indirect participant relating to, or payments made on account of, a Book-Entry Interest; or
Euroclear, Clearstream or any participant or indirect participant. Payments by participants to owners of Book-Entry Interests held through participants are the responsibility of such participants, as is now the case with securities held for the accounts of customers registered in “street name.” Currency and Payment for the Global Notes The principal of, premium, if any, and interest on, and all other amounts payable in respect of, the Global Notes, will be paid to holders of interest in such Notes (the “Holders”) through Euroclear or Clearstream in euros. Action by Owners of Book-Entry Interests Euroclear and Clearstream have advised us that they will take any action permitted to be taken by a Holder only at the direction of one or more participants to whose account the Book-Entry Interests in the Global
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Notes are credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. Euroclear and Clearstream will not exercise any discretion in the granting of consents, waivers or the taking of any other action in respect of the Global Notes. However, if there is an event of default under the Indenture, each of Euroclear and Clearstream reserves the right to exchange the Global Notes for Definitive Registered Notes in certificated form, and to distribute such Definitive Registered Notes to their respective participants. Transfers The Global Notes will bear a legend to the effect set forth in “Notice to Investors.” Book-Entry Interests in the Global Notes will be subject to the restrictions on transfer discussed in “Notice to Investors.” 144A Book-Entry Interests may be transferred to a person who takes delivery in the form of Regulation S Book-Entry Interests denominated in the same currency only upon delivery by the transferor of a written certification (in the form provided in the Indenture) to the effect that such transfer is being made in accordance with Regulation S. Prior to 40 days after the date of the initial sale of the Notes, Regulation S Book-Entry Interests will be limited to persons that have accounts with Euroclear or Clearstream or persons who hold interests through Euroclear or Clearstream, and any sale or transfer of such interest to U.S. Persons shall not be permitted during such periods unless such resale or transfer is made pursuant to Rule 144A. Regulation S Book-Entry Interests may be transferred to a person who takes delivery in the form of 144A Book-Entry Interests only upon delivery by the transferor of a written certification (in the form provided in the Indenture) to the effect that such transfer is being made to a person who the transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A or otherwise in accordance with the transfer restrictions described under “Notice to Investors” and in accordance with any applicable securities laws of any other jurisdiction. Subject to the foregoing, and as set forth in “Notice to Investors,” Book-Entry Interests may be transferred and exchanged as described under “Description of the Notes—Transfer and Exchange.” Any Book-Entry Interest in one of the Global Notes that is transferred to a person who takes delivery in the form of a Book-Entry Interest in the other Global Note of the same denomination will, upon transfer, cease to be a Book-Entry Interest in the first-mentioned Global Note and become a Book-Entry Interest in the other Global Note, and accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to Book-Entry Interests in such other Global Note for as long as it retains such a Book-Entry Interest. Definitive Registered Notes may be transferred and exchanged for Book-Entry Interests in a Global Note only as described under “Description of the Notes—Transfer and Exchange” and, if required, only if the transferor first delivers to the Trustee a written certificate (in the form provided in the Indenture) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such Notes. See “Notice to Investors.” Information Concerning Euroclear and Clearstream All Book-Entry Interests will be subject to the operations and procedures of Euroclear and Clearstream, as applicable. We provide the following summaries of those operations and procedures solely for the convenience of investors. The operations and procedures of each settlement system are controlled by that settlement system and may be changed at any time. Neither we, the Guarantors nor the Initial Purchasers are responsible for those operations or procedures. Euroclear and Clearstream hold securities for participant organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic Book-Entry charges in accounts of such participants. Euroclear and Clearstream provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing and Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodian relationship with a Euroclear or Clearstream participant, either directly or indirectly.
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Because Euroclear and Clearstream can only act on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of an owner of a beneficial interest to pledge such interest to persons or entities that do not participate in Euroclear or Clearstream systems, or otherwise take actions in respect of such interest, may be limited by the lack of a definite certificate for that interest. The laws of some jurisdictions require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer beneficial interests to such person may be limited. In addition, owners of beneficial interests through Euroclear or Clearstream systems will receive distributions attributable to the 144A Global Notes only through Euroclear or Clearstream participants. Global Clearance and Settlement under the Book-Entry System The Notes represented by the Global Notes are expected to be included on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market of Euronext Dublin, and any permitted secondary market trading activity in such Notes will therefore be required by Euroclear or Clearstream to be settled in immediately available funds. We expect that secondary trading in any certificated Notes will also be settled in immediately available funds. None of us, the Guarantors, the Trustee or the Paying Agent will have any responsibility for the performance by Euroclear or Clearstream or their respective participants or indirect participants, of their respective obligations under the rules and procedures governing their operations. Initial Settlement Initial settlement for the Notes will be made in euros. Book-Entry Interests owned through Euroclear or Clearstream accounts will follow the settlement procedures applicable to conventional euro denominated bonds in registered form. Book-Entry Interests will be credited to the securities custody accounts of Euroclear and Clearstream holders on the business day following the settlement date against payment for value on the settlement date. Secondary Market Trading The Book-Entry Interests will trade through participants of Euroclear or Clearstream and will settle in same-day funds. Since the purchase determines the place of delivery, it is important to establish at the time of trading of any Book-Entry Interests where both the purchaser’s and the seller’s accounts are located to ensure that settlement can be made on the desired value date.
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TAX CONSIDERATIONS The information provided below does not purport to be a complete analysis of the tax law and practice currently applicable in the United Kingdom and the United States and does not purport to address the tax consequences applicable to all categories of investors, some of which may be subject to special rules. Prospective purchasers of the Notes are advised to consult with their tax advisors as to the tax consequences of a purchase of Notes including, without limitation, the consequences of receipt of interest, premium and additional amounts paid (if any), and the sale or redemption of the Notes or any interest therein. The summaries set forth below are based upon, as applicable, United Kingdom or United States law as in effect on the date of this Offering Memorandum and are subject to any change in such law, possibly with retroactive effect. References in this section to holders of Notes are to the beneficial owners of Notes. Terms defined under each subsection related to United Kingdom and United States tax law below only have such meanings as defined therein for such respective section. The statements regarding United Kingdom and United States laws and practices set forth below assume that the Notes will be issued and the transfers thereof will be made, in accordance with the Indenture and in the form of Book-Entry Interests. Certain United Kingdom Tax Considerations The following applies only to persons who are the beneficial owners of Notes and is a summary of our understanding of current United Kingdom law and published Her Majesty’s Revenue and Customs (“HMRC”) practice relating only to certain United Kingdom tax consequences in respect of the Notes. The following is not exhaustive and does not deal with any other United Kingdom taxation implications of acquiring, holding or disposing of Notes. The United Kingdom tax treatment depends on individual circumstances and may be subject to change in the future. Prospective holders of Notes who are in any doubt as to their tax position or who may be subject to tax in a jurisdiction other than the United Kingdom should seek their own professional advice. Payment of Interest on the Notes Payments of interest on the Notes may be made without deduction or withholding for, or on account of, United Kingdom income tax; provided that the Notes are and continue to be listed on a “recognised stock exchange” within the meaning of Section 1005 of the Income Tax Act 2007 (the “Act”). Euronext Dublin is a “recognised stock exchange” for these purposes. Securities such as the Notes will be treated as listed on Euronext Dublin if they are included in the Official List of Euronext Dublin and are admitted to trading on the Global Exchange Market of Euronext Dublin. Interest on the Notes may also be paid without deduction or withholding for, or on account of, United Kingdom income tax where interest on the Notes is paid by a company and, at the time the payment is made, the payer reasonably believes (and any person by or through whom interest on the Notes is paid reasonably believes) that the beneficial owner of that interest is within the charge to United Kingdom corporation tax as regards that payment of interest: provided that HMRC has not given a direction (in circumstances where it has reasonable grounds to believe that it is likely that the above exemption is not available in respect of such payment of interest at the time the payment is made) that the interest should be paid under deduction of tax. In certain other cases, an amount must generally be withheld from payments of interest on the Notes on account of United Kingdom income tax at the basic rate (currently 20%), subject to any other available relief, including under any applicable double taxation treaty. HMRC has powers, in certain circumstances, to obtain information about: payments derived from securities (whether income or capital), certain payments of interest (including the amount payable on the redemption of a deeply discounted security) and securities transactions. The persons from whom HMRC can obtain information include: a person who receives (or is entitled to receive) a payment derived from securities; a person who makes such a payment (received from, or paid on behalf of another person); a person by or through whom interest is paid or credited; a person who effects or is a party to securities transactions (which includes an issue of securities) on behalf of others; registrars or administrators in respect of securities transactions; and each registered or inscribed holder of securities. The information HMRC can obtain includes: details of the beneficial owner of securities; details of the person for
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whom the securities are held, or the person to whom the payment is to be made (and, if more than one, their respective interests); information and documents relating to securities transactions; and, in relation to interest paid or credited on money received or retained in the United Kingdom, the details of the security under which interest is paid. HMRC is generally not able to obtain information (under its power relating solely to interest) about a payment of interest to (or a receipt for) a person that is not an individual. This limitation does not apply to HMRC’s power to obtain information about payments derived from securities. In certain circumstances, the information which HMRC has obtained using these powers may be exchanged with tax authorities in other jurisdictions. Interest on the Notes may be subject to United Kingdom tax by way of assessment (including self-assessment) even where paid without withholding or deduction for or on account of United Kingdom tax. In particular, interest on the Notes received without withholding or deduction for or on account of United Kingdom income tax may be brought within the charge to United Kingdom tax in the hands of a holder of Notes (other than certain trustees) who is not resident for tax purposes in the United Kingdom where (a) such holder of Notes is a company which carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom or, if such holder is not a company, such holder carries on a trade, profession or vocation in the United Kingdom through a branch or agency, and (b) the interest is received in connection with, or the Notes are attributable to, or used for the purposes of or held by, that permanent establishment, branch or agency. There are exemptions for interest received by certain categories of agent (such as some brokers and investment managers). The provisions of an applicable double taxation treaty may also be relevant for such holders of Notes. United Kingdom Corporation Tax Payers In general, holders of Notes which are within the charge to United Kingdom corporation tax (and in relation to non-United Kingdom tax resident company holders of Notes, the interest is received in connection with, or the Notes are attributable to, used for the purposes of or held by the relevant holder’s permanent establishment in the United Kingdom) may be charged to United Kingdom corporation tax as income on all returns, profits or gains on, and fluctuations in value of, the Notes broadly in accordance with their statutory accounting treatment. Other United Kingdom Tax Payers; Taxation of Chargeable Gains A disposal of Notes by an individual holder of Notes who is resident for tax purposes in the United Kingdom or who carries on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Notes are attributable may give rise to a chargeable gain or allowable loss for the purposes of the United Kingdom taxation of chargeable gains. Special rules may apply to individuals who have ceased to be resident in the United Kingdom and who dispose of their Notes before becoming once again resident in the United Kingdom. Other United Kingdom Tax Payers; Accrued Income Profits On a disposal of Notes by a holder of Notes, any interest which has accrued since the last interest payment date may be chargeable to United Kingdom tax as income under the rules relating to accrued income profits as set out in Part 12 of the Act if such holder of Notes is resident in the United Kingdom or carries on a trade in the United Kingdom through a branch or agency to which the Notes are attributable. Holders of Notes are advised to consult their own professional advisers for further information about the accrued income profits rules in particular. Other United Kingdom Tax Payers; Taxation of Discount Dependent, among other things, on the discount (if any) at which the Notes are issued, the Notes may be deemed to constitute “deeply discounted securities” for the purposes of Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005. If the Notes are deemed to constitute deeply discounted securities for those purposes, individual holders of Notes who are resident for tax purposes in the United Kingdom or who carry on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Notes are attributable generally may be liable to United Kingdom income tax on any gain made on the sale or other
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disposal (including redemption) of the Notes. Holders of Notes are advised to consult their own professional advisers if they require any advice or further information relating to “deeply discounted securities.” Stamp Duty and Stamp Duty Reserve Tax (“SDRT”) No United Kingdom stamp duty or SDRT should be payable in relation to the issue or any transfer of the Notes in the form of Book-Entry Interests. Certain U.S. Federal Income Tax Considerations The following discussion is a summary of certain U.S. federal income tax consequences of the purchase, ownership and disposition of Notes, but does not purport to be a complete analysis of all potential tax effects. The summary is limited to consequences relevant to a U.S. holder (as defined below) and does not address the effects of any U.S. federal tax laws other than U.S. federal income tax laws (such as estate and gift tax laws and the Medicare tax) or any state, local or non-U.S. tax laws. This discussion is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations issued thereunder, and judicial and administrative interpretations thereof, each as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. No rulings from the U.S. Internal Revenue Service (“IRS”) have been or are expected to be sought with respect to the matters discussed below. There can be no assurance that the IRS will not take a different position concerning the tax consequences of the purchase, ownership or disposition of the Notes or that any such position would not be sustained. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to holders subject to special rules, such as banks and other financial institutions, U.S. expatriates, insurance companies, dealers in securities or currencies, traders in securities that elect mark-to-market accounting for their securities holdings, U.S. holders whose functional currency is not the U.S. dollar, tax exempt entities, regulated investment companies, real estate investment trusts, partnerships or other pass-through entities and investors in such entities, persons liable for alternative minimum tax, a corporation that accumulated earnings to avoid U.S. federal income tax, U.S. holders that hold the Notes through non-U.S. brokers or other non-U.S. intermediaries and persons holding the Notes as part of a “straddle,” “hedge,” “conversion transaction,” “constructive sale” or other integrated transaction. In addition, this discussion is limited to U.S. holders that purchase Notes for cash at original issue and at their “issue price” (i.e., the first price at which a substantial amount of the Notes is sold to the public for cash, excluding sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) and who hold the Notes as capital assets within the meaning of Section 1221 of the Code. For purposes of this discussion, a “U.S. holder” is a beneficial owner of a Note that is, for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation incorporated or organized under the laws of the United States, any state thereof or the District of Columbia; (iii) any estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) any trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or if a valid election is in place to treat the trust as a U.S. person. If any entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Notes, the U.S. tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partnership considering an investment in the Notes, and partners in such a partnership, should consult their tax advisors regarding the U.S. federal income tax consequences of the purchase, ownership and disposition of the Notes. Prospective purchasers of Notes should consult their tax advisors concerning the tax consequences of purchasing, owning or disposing of Notes in light of their particular circumstances, including the application of the U.S. federal income tax considerations discussed below, as well as the application of other U.S. federal, state, local, foreign or other tax laws. Characterization of the Notes In certain circumstances, we may be obligated to make payments on the Notes in excess of stated interest and stated principal, as described, for example, under “Description of the Notes—Change of Control.” Under the contingent payment debt instrument U.S. Treasury Regulations (“CPDI Regulations”), the possibility of
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contingent payments on a Note may be disregarded if the likelihood of the contingent payments, as of the date the Notes are issued, is remote or the amount of the payments is incidental in the aggregate. We do not intend to treat the possibility of the contingent payments on the Notes as subjecting the Notes to the CPDI Regulations. It is possible, however, that the IRS may take a different position regarding the possibility of such contingent payments, in which case, if the position of the IRS were sustained, the timing, amount and character of income recognized with respect to a Note may be different than described herein and a U.S. holder may be required to recognize income significantly in excess of payments received and may be required to treat as interest income all or a portion of any gain recognized on the disposition of a Note. The remainder of this discussion assumes that the Notes will not be treated as contingent payment debt instruments. U.S. holders should consult their tax advisors regarding the potential application of the CPDI Regulations to the Notes. New Legislation Under recently enacted legislation informally known as the Tax Cuts and Jobs Act, U.S. holders that use an accrual method of accounting for U.S. federal income tax purposes generally will be required to include certain amounts in income no later than the time such amounts are reflected on certain financial statements. The application of this rule thus may require the accrual of income earlier than would be the case under the general tax rules described below, although the precise application of this rule is unclear at this time. This rule generally will be effective for tax years beginning after December 31, 2017 or, for debt instruments issued with original issue discount, for tax years beginning after December 31, 2018. U.S. holders that use an accrual method of accounting should consult their tax advisors regarding the potential applicability of this legislation to their particular situation. Payments of Interest Payments of stated interest on the Notes (including any additional amounts paid in respect of withholding taxes and without reduction for any amounts withheld) generally will be taxable to a U.S. holder as ordinary income at the time that such payments are received or accrued, in accordance with such U.S. holder’s method of accounting for U.S. federal income tax purposes. A U.S. holder that uses the cash method of accounting for U.S. federal income tax purposes (a “cash basis U.S. holder”) and that receives a payment of stated interest on the Notes will be required to include in income (as ordinary income) the U.S. dollar value of the euro interest payment (determined based on the spot rate on the date such payment is received) regardless of whether the payment is in fact converted to U.S. dollars. A cash basis U.S. holder will not recognize foreign currency exchange gain or loss with respect to the receipt of such stated interest, but may have exchange gain or loss attributable to the actual disposition of the euros so received. A U.S. holder that uses the accrual method of accounting for U.S. federal income tax purposes (an “accrual basis U.S. holder”) will be required to include in income (as ordinary income) the U.S. dollar value of the amount of stated interest in euros that has accrued with respect to the Notes during an accrual period. The U.S. dollar value of such euro-denominated stated interest will be determined by translating such amount at the average spot rate of exchange for the accrual period or, with respect to an accrual period that spans two taxable years, at the average spot rate of exchange for the partial period within each taxable year. An accrual basis U.S. holder may elect, however, to translate such accrued stated interest into U.S. dollars using the spot rate of exchange on the last day of the interest accrual period or, with respect to an accrual period that spans two taxable years, using the spot rate of exchange on the last day of the partial period within each taxable year. Alternatively, if the last day of an accrual period is within five business days of the date of receipt of the stated interest, a U.S. holder that has made the election described in the prior sentence may translate such interest using the spot rate of exchange on the date of receipt of the stated interest. The above election will apply to all debt instruments held by an electing U.S. holder from year to year and may not be changed without the consent of the IRS. An accrual basis U.S. holder will recognize foreign currency exchange gain or loss with respect to stated interest on the date such interest is received. The amount of exchange gain or loss recognized will equal the difference, if any, between the U.S. dollar value of the euro payment received (determined based on the spot rate on the date such stated interest is received) and the U.S. dollar value of the stated interest (determined as described above), regardless of whether the payment is in fact converted to U.S. dollars. Any such exchange gain or loss generally will constitute ordinary income or loss and be treated,
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for foreign tax credit purposes, as U.S. source income or loss, and generally not as an adjustment to interest income or expense. Original Issue Discount The Notes may be issued with OID for U.S. federal income tax purposes. In such event, U.S. holders generally will be required to include such OID in gross income (as ordinary income) for U.S. federal income tax purposes as it accrues (on a constant yield method) regardless of their regular method of accounting for U.S. federal income tax purposes. As a result, U.S. holders will include any OID in income in advance of the receipt of cash attributable to such OID. The Notes will be treated as issued with OID if the stated principal amount of the Notes exceeds their issue price (as defined above) by an amount equal to or more than a statutorily defined de minimis amount (generally, 0.0025 multiplied by the stated principal amount and the number of complete years to maturity from the Issue Date). In the event that the Notes are issued with OID, the amount of OID includible in income by a U.S. holder is the sum of the “daily portions” of OID with respect to the Note for each day during the taxable year or portion thereof in which such U.S. holder holds such Note (“Accrued OID”). A daily portion is determined by allocating to each day in any “accrual period” a pro rata portion of the OID that accrued in such period. The “accrual period” of a Note may be of any length and may vary in length over the term of the Note: provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs either on the first or last day of an accrual period. The amount of OID that accrues with respect to any accrual period is the excess of: (i) the product of the Note’s “adjusted issue price” at the beginning of such accrual period and its yield to maturity, determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of such period, over: (ii) the amount of stated interest allocable to such accrual period. The adjusted issue price of a Note at the start of any accrual period is equal to its issue price, increased by the Accrued OID for each prior accrual period. OID, if any, on the Notes will be determined for any accrual period in euros and then translated into U.S. dollars in accordance with either of the two alternative methods described above. A U.S. holder will recognize foreign currency exchange gain or loss when OID is paid (including, upon the sale, exchange, retirement, redemption or other taxable disposition of a Note, the receipt of proceeds attributable to OID previously included in income) to the extent of the difference, if any, between the U.S. dollar value of the euro payment received, determined based on the spot rate of exchange on the date such payment is received, and the U.S. dollar value of the accrued OID, as determined in the manner described above. For these purposes, all receipts on a Note will be viewed first, as payments of stated interest payable on the Note; second, as receipts of previously accrued OID, with payments considered made for the earliest accrual periods first; and third, as receipt of principal. Foreign currency exchange gain or loss generally will constitute ordinary income or loss and be treated, for foreign tax credit purposes, as U.S. source income or loss, and generally not as an adjustment to interest income or expense. Foreign Tax Credit Stated interest and OID, if any, on a Note generally will constitute foreign source income and generally will be considered “passive category income” or, in the case of certain U.S. holders, “general category income” in computing the foreign tax credit allowable to U.S. holders under U.S. federal income tax laws. There are significant complex limitations on a U.S. holder’s ability to claim foreign tax credits. U.S. holders should consult their tax advisors regarding the creditability or deductibility of any withholding taxes. Sale, Exchange, Retirement, Redemption or Other Taxable Disposition of Notes Upon the sale, exchange, retirement, redemption or other taxable disposition of a Note, a U.S. holder generally will recognize U.S. source gain or loss equal to the difference, if any, between the amount realized upon such disposition (less any amount equal to any accrued but unpaid stated interest, which will be taxable as stated interest income as discussed above and such U.S. holder’s adjusted tax basis in the Note. If a U.S. holder receives an amount upon disposition in euros or other foreign currency, the amount realized generally
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will be the U.S. dollar value of the foreign currency received upon such disposition based on the spot rate of exchange on the date of disposition. However, if the Notes are traded on an established securities market, a cash basis U.S. holder and, if it so elects, an accrual basis U.S. holder, will determine the U.S. dollar value of such foreign currency by translating such amount at the spot rate of exchange on the settlement date of such disposition. The special election available to accrual basis U.S. holders in regard to the sale or other disposition of Notes traded on an established securities market must be applied consistently to all debt instruments held by the U.S. holder from year to year and cannot be changed without the consent of the IRS. An accrual basis U.S. holder that does not make this special election will recognize exchange gain or loss to the extent that there are exchange rate fluctuations between the date of disposition and the settlement date, and any such gain or loss generally will constitute ordinary income or loss. A U.S. holder’s adjusted tax basis in a Note will, in general, be the cost of such Note to such U.S. holder, increased by any accrued OID previously included in income by such U.S. holder. If a U.S. holder uses euros or other foreign currency to purchase a Note, the cost of the Note will be the U.S. dollar value of the foreign currency purchase price determined at the spot rate of exchange on the date of purchase. However, if the Notes are traded on an established securities market, a cash basis U.S. holder and, if it is so elects, an accrual basis U.S. holder, will determine the U.S. dollar value of the purchase price on the settlement date of purchase. The conversion of U.S. dollars to a foreign currency and the immediate use of that currency to purchase a Note generally will not result in taxable gain or loss for a U.S. holder. Any gain or loss recognized upon the sale, exchange, retirement, redemption or other taxable disposition of a Note generally will be U.S. source gain or loss and, except as discussed below with respect to foreign currency exchange gain or loss, generally will be capital gain or loss. Capital gains of non-corporate U.S. holders (including individuals) derived in respect of capital assets held for more than one year are generally eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized upon the sale, exchange, redemption, retirement or other taxable disposition of a Note that is attributable to fluctuations in currency exchange rates generally will be U.S. source ordinary income or loss and generally will not be treated as interest income or expense. Gain or loss attributable to fluctuations in currency exchange rates generally will equal the difference, if any, between the U.S. dollar value of the U.S. holder’s foreign currency purchase price for the Note, determined at the spot rate of exchange on the date the U.S. holder disposes of the Note and the U.S. dollar value of the U.S. holder’s purchase price for the Note, determined at the spot rate of exchange on the date the U.S. holder purchased such Note. In addition, upon the sale, exchange, redemption, retirement or other taxable disposition of a Note, a U.S. holder may recognize exchange gain or loss attributable to amounts received with respect to accrued and unpaid stated interest and accrued OID, if any, which will be treated as discussed above under “— Payments of Interest” or “—Original Issue Discount,” as applicable. However, upon a sale, exchange, redemption, retirement or other taxable disposition of a Note, a U.S. holder will recognize any foreign currency exchange gain or loss (including with respect to accrued interest and Accrued OID) only to the extent of total gain or loss recognized by such U.S. holder on such disposition. Exchange of Foreign Currencies A U.S. holder will have a tax basis in any euros or other foreign currency received as stated interest or upon the sale, exchange, redemption, retirement or other taxable disposition of a Note equal to the U.S. dollar value thereof at the spot rate of exchange in effect on the date of receipt of the foreign currency. Any gain or loss realized by a U.S. holder on a sale or other disposition of foreign currency, including their exchange for U.S. dollars, will be ordinary income or loss generally not treated as interest income or expense and generally will be U.S. source income or loss for U.S. foreign tax credit purposes. Information Reporting and Backup Withholding In general, information reporting requirements will apply to payments of interest (including the accrual of OID, if any) on the Notes and to the proceeds of the sale or other disposition (including a retirement or redemption) of a Note paid to a U.S. holder unless such U.S. holder is an exempt recipient, and, when required, provides evidence of such exemption. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification number or a certification that it is not subject to backup withholding and otherwise comply with any applicable requirements of the backup withholding rules.
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Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS. Tax Return Disclosure Requirements U.S. Treasury regulations issued under the Code meant to require the reporting to the IRS of certain tax shelter transactions cover certain transactions generally not regarded as tax shelters, including certain foreign currency transactions giving rise to losses in excess of a certain minimum amount (e.g., $50,000 in the case of an individual or trust), such as the receipt or accrual of interest or a sale, exchange, retirement or other taxable disposition of a foreign currency note or foreign currency received in respect of a foreign currency note. U.S. holders should consult their tax advisors to determine the tax return disclosure obligations, if any, with respect to an investment in the Notes, including any requirement to file IRS Form 8886 (Reportable Transaction Disclosure Statement). Individuals that own “specified foreign financial assets” with an aggregate value in excess of $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year (or such larger values as specified in such legislation) generally are required to file an information report with respect to such assets with their tax returns. The Notes generally will constitute specified foreign financial assets subject to these reporting requirements, unless the Notes are held in an account at certain financial institutions. U.S. holders are urged to consult their tax advisors regarding the application of the foregoing disclosure requirements to their ownership of the Notes, including the significant penalties for non-compliance.
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PLAN OF DISTRIBUTION Subject to the terms and conditions set forth in a purchase agreement to be dated on or about June 21, 2018 (the “Purchase Agreement”), by and among us and the Initial Purchasers, we have agreed to sell to the Initial Purchasers, and each Initial Purchaser has agreed, severally and not jointly, to purchase from us, the Notes. The Purchase Agreement provides that the obligations of the Initial Purchasers to pay for and accept delivery of the Notes are subject to, among certain other conditions, the delivery of certain legal opinions by counsel. We have agreed, subject to certain limited exceptions, that during the period from the date hereof through and including the date that is 90 days after the date the Notes are issued, to not, without having received prior written consent provided for in the Purchase Agreement, offer, sell, contract to sell or otherwise dispose of any securities issued or guaranteed by us, or any Guarantor that are substantially similar to the Notes and the Guarantees. The Initial Purchasers propose to offer the Notes initially at the respective issue price indicated on the cover page hereof. After the initial offering of the Notes, the offering price and other selling terms of the Notes may from time to time be changed by the Initial Purchasers without notice. The Initial Purchasers may offer and sell Notes through certain of their affiliates, including in respect of sales into the United States. The Notes and the Guarantees have not been and will not be registered under the U.S. Securities Act. The Initial Purchasers have agreed that they will only offer or sell the Notes: (i) outside the United States to persons who are not U.S. Persons in offshore transactions in reliance on Regulation S; and (ii) in the United States to QIBs in reliance on Rule 144A. The terms used above have the meanings given to them by Regulation S and Rule 144A. In addition, until 40 days after the commencement of the Offering, an offer or sale of the Notes within the United States by a dealer that is not participating in the Offering may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or pursuant to another exemption from registration under the U.S. Securities Act. Each of the Initial Purchasers has also represented and agreed that: (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to us or the Guarantors; and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom. No action has been taken in any jurisdiction, including the United States and the United Kingdom, by us or the Initial Purchasers that would permit a public offering of the Notes or the possession, circulation or distribution of this Offering Memorandum or any other material relating to us, the Guarantors or the Notes in any jurisdiction where action for such purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Offering Memorandum nor any other offering material or advertisements in connection with the Notes may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction. This Offering Memorandum does not constitute an offer to sell or a solicitation of an offer to purchase in any jurisdiction where such offer or solicitation would be unlawful. Persons into whose possession this Offering Memorandum comes are advised to inform themselves about and to observe any restrictions relating to the Offering, the distribution of this Offering Memorandum and resales of the Notes. Please see the sections entitled “Notice to Investors” and “Notice to Certain European Investors.” Persons who purchase Notes from the Initial Purchasers may be required to pay stamp duty, taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the Offering price set forth on the cover page hereof. The Notes are a new issue of securities for which there currently is no market. We have applied, through the Irish Listing Agent, for the Notes to be included on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market of Euronext Dublin. The Initial Purchasers have advised us that they intend to make a market in the Notes as permitted by applicable law. The Initial Purchasers are not obligated, however, to make a market in the Notes, and any
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market-making activity may be discontinued at any time at the sole discretion of the Initial Purchasers without notice. In addition, any such market-making activity will be subject to the limits imposed by the U.S. Securities Act and the U.S. Exchange Act. Accordingly, there is no assurance you that any market for the Notes will develop, that it will be liquid if it does develop, or that you will be able to sell any Notes at a particular time or at a price which will be favorable to you. We, and the Guarantors have agreed to indemnify each Initial Purchaser against certain liabilities, including liabilities under the U.S. Securities Act. We will pay the Initial Purchasers a commission and pay certain fees and expenses relating to the Offering. It is expected that delivery of the Notes will be made against payment therefor on or about the date specified as the issue date in this Offering Memorandum, which will be the fourth business day following the date of pricing of the Notes (such settlement being herein referred to as “T+4”). Under Rule 15(c) 6-1 of the U.S. Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trades expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of pricing or the next succeeding business day will be required, by virtue of the fact that the Notes initially will settle in T+4, to specify an alternate settlement cycle at the time of any such trade to prevent failed settlement. Purchasers of the Notes who wish to trade the Notes on the date of pricing or the next succeeding business day should consult their own advisor. In connection with the Offering, the Stabilizing Manager may over-allot the Notes or effect transactions with a view to supporting the market price of the Notes, in each case at a level higher than that which might otherwise prevail. However, stabilization with respect to the Notes may not necessarily occur. Any stabilization action may begin on or after the date on which adequate public disclosure of the final terms of the Offering is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the date on which we received the proceeds of the offering and sale of the Notes and 60 days after the date of the allotment of the Notes. The Initial Purchasers or their respective affiliates have engaged in, and may in the future engage in, investment banking, financial advisory, consulting, commercial banking and other commercial dealings, including as acting as hedge counterparties with us, our principal shareholders or our affiliates. In addition, the Initial Purchasers or their respective affiliates have lending relationships with us, our principal shareholders or our affiliates. They have received, and expect to receive, customary fees, commissions and expense reimbursements for such transactions. The Initial Purchasers or their respective affiliates are lenders or agents under the Revolving Credit Facilities Agreement or the Term Loan Facility Agreement. The Initial Purchasers or their respective affiliates may hold the Target Notes and may tender the Target Notes in the Tender Offer. Typically, the Initial Purchaser and their respective affiliates would hedge the exposure to the Target Notes by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities (including potentially the Notes). Any such short positions could adversely affect future trading prices of the Notes. The Initial Purchasers and their affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long or short positions in such securities and instruments. Selling Restrictions United States The Notes have not been and will not be registered under the U.S. Securities Act and the Notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. Persons except in certain transactions exempt from, or in a transaction not subject to the registration requirements of, the U.S. Securities Act. Each Initial Purchaser has agreed that it will not offer, sell or deliver the Notes, (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the Issue Date (the “distribution compliance period”) within the United States or to, or for the account or benefit of, U.S. Persons and that it will have sent to each dealer to which it sells Notes (other than a sale pursuant to Rule
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144A) during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. Persons substantially to the following effect: “The Notes covered hereby have not been registered under the U.S. Securities Act and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. Persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the Issue Date, except in either case in accordance with Regulation S or Rule 144A under the U.S. Securities Act. Terms used above have the meanings given to them by Regulation S.” In addition, until 40 days after the commencement of the Offering, an offer or sale of Notes within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or pursuant to another exemption from registration under the U.S. Securities Act. The Purchase Agreement provides that each Initial Purchaser may directly or through its U.S. broker dealer affiliate arrange for the offer and resale of Notes within the United States only to QIBs in reliance on Rule 144A. Terms used in this section have the meanings given to them by Regulation S under the U.S. Securities Act. European Economic Area Prohibition of Sales to EEA Retail Investors In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each Initial Purchaser has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of the Notes to the public in that Relevant Member State other than: (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive; (b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the relevant manager or managers nominated by the Issuer for any such offer; or (c) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes shall require the Issuer or any Joint Bookrunner to publish a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State. The expression “Prospectus Directive” means Directive 2003/71/EC (as amended including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State. MIFID II Product Governance/Professional Investors and ECPs Only Target Market Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.
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PRIIPs Regulation / Prohibition of Sales to EEA Retail Investors The Notes are not intended to be offered, sold or otherwise made available to and should not be made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of the Insurance Mediation Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently no key information document required by the PRIIPs Regulation for offering or selling the notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation. United Kingdom Each Initial Purchaser has agreed that: (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the Guarantors; and (b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom. Italy The Offering has not been cleared by the Commissione Nazionale per la Società e la Borsa (“CONSOB”) (the Italian securities exchange commission) pursuant to Italian securities legislation and will not be subject to formal review by CONSOB. Accordingly, no Notes may be offered, sold or delivered, directly or indirectly nor may copies of this Offering Memorandum or of any other document relating to the Notes be distributed in the Republic of Italy, except (a) to qualified investors (investitori qualificati) as defined in Article 35, first paragraph, letter (d) of CONSOB Regulation No. 20307 of February 15, 2018, as amended (“Regulation 20307”), pursuant to Article 34-ter, first paragraph letter (b) of CONSOB Regulation No. 11971 of May 14, 1999, as amended (“Regulation 11971”), implementing Article 100 of Legislative Decree No. 58 of February 24, 1998, as amended (the “Italian Financial Act”); and (b) in any other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Italian Financial Act and the implemented CONSOB regulations, including Regulation 11971. For the purposes of this provision, the expression “offer of Notes to the public” in Italy means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, including the placement through authorized intermediaries. Any such offer, sale or delivery of the Notes or distribution of copies of this Offering Memorandum or any other document relating to the Notes in the Republic of Italy must be in compliance with the selling restrictions under (a) and (b) above and must be: (i) made by soggetti abilitati (including investment firms, banks or financial intermediaries, as defined by Article 1, first paragraph, letter r), of the Italian Financial Act), to the extent duly authorized to engage in the placement or underwriting or purchase of financial instruments in the Republic of Italy in accordance with the relevant provisions of the Italian Financial Act, Regulation 20307, as amended, Italian Legislative Decree No. 385 of September 1, 1993, as amended (the “Italian Banking Act”), Regulation 11971and any other applicable laws and regulations; (ii) in compliance with all relevant Italian securities, tax, exchange control and any other applicable laws and regulations and any other applicable requirement or limitation that may be imposed from time to time by CONSOB, the Bank of Italy (including, the reporting requirements, where applicable, pursuant to Article 129 of the Italian Banking Act and the implementing guidelines of the Bank of Italy, as amended from time to time) or any other relevant Italian competent authorities; and
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(iii) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or the Bank of Italy or any other Italian authority. Any investor purchasing the Notes is solely responsible for ensuring that any offer, sale, delivery or resale of the Notes by such investor occurs in compliance with applicable Italian laws and regulations. General Each of the Initial Purchasers has agreed that it will (to the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes this Offering Memorandum and will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and none of us, the Guarantors nor any of the other Initial Purchasers shall have any responsibility therefor. None of us, the Guarantors nor the Initial Purchasers represents that the Notes may at any time lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility for facilitating such sale. Transfer restrictions As a result of the following restrictions, purchasers of the Notes in the United States are advised to consult legal counsel prior to making any purchase, offer, sale, resale or other transfer of the Notes. Each purchaser of the Notes or person wishing to transfer an interest from one Global Note to another or from global to definitive form or vice versa, will be required to acknowledge, represent and agree as follows (terms used in this paragraph that are defined in Rule 144A or in Regulation S are used herein as defined therein): 1. that (a) it is a QIB, purchasing (or holding) the Notes for its own account or for the account of one or more QIBs and it is aware that any sale to it is being made in reliance on Rule 144A or (b) it is outside the United States and is not a U.S. Person; 2. that the Notes are being offered and sold in a transaction not involving a public offering in the United States within the meaning of the U.S. Securities Act, and that the Notes have not been and will not be registered under the U.S. Securities Act or any other applicable U.S. state securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. Persons except as set forth below; 3. that, if it holds an interest in a Rule 144A Global Note, if in the future it decides to resell, pledge or otherwise transfer the Notes or any beneficial interests in the Notes, it will do so only (a) to the Issuer or any affiliate thereof, (b) inside the United States to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, (c) outside the United States in compliance with Rule 903 or Rule 904 under the U.S. Securities Act, (d) pursuant to the exemption from registration provided by Rule 144A (if available) or (e) pursuant to an effective registration statement under the U.S. Securities Act, in each case in accordance with all applicable U.S. state securities laws; 4. it will, and will require each subsequent holder to, notify each person to whom it transfers the Notes of the resale restrictions referred to in paragraph (3) above, if then applicable; 5. that Notes initially offered in the United States to QIBs will be represented by one or more Rule 144A Global Notes and that the Notes offered outside the United States in reliance on Regulation S will be represented by one or more Regulation S Global Notes; 6. that the Notes, other than the Regulation S Global Notes, will bear a legend to the following effect unless otherwise agreed to by the Issuer: “THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY OTHER APPLICABLE U.S. STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
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WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (A) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER“(AS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT) PURCHASING THE SECURITIES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QUALIFIED INSTITUTIONAL BUYERS; (B) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITIES EXCEPT IN ACCORDANCE WITH THE PURCHASE AGREEMENT AND (1) TO THE ISSUER OR ANY AFFILIATE THEREOF, (2) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE U.S. SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE U.S. SECURITIES ACT, (4) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE U.S. SECURITIES ACT (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND ANY OTHER JURISDICTION; AND (C) IT AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS SECURITY AND RELATED DOCUMENTATION (INCLUDING, WITHOUT LIMITATION, THE PURCHASE AGREEMENT REFERRED TO HEREIN) MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, WITHOUT THE CONSENT OF, BUT UPON NOTICE TO, THE HOLDERS OF SUCH SECURITIES SENT TO THEIR REGISTERED ADDRESSES, TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO RESALES OR OTHER TRANSFERS OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY SHALL BE DEEMED, BY ITS ACCEPTANCE OR PURCHASE HEREOF, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT (EACH OF WHICH SHALL BE CONCLUSIVE AND BINDING ON THE HOLDER HEREOF AND ALL FUTURE HOLDERS OF THIS SECURITY AND ANY SECURITIES ISSUED IN EXCHANGE OR SUBSTITUTION THEREFOR, WHETHER OR NOT ANY NOTATION THEREOF IS MADE HEREON).”; 7. if it is outside the United States and is not a U.S. Person, that if it should resell or otherwise transfer the Notes prior to the expiration of the distribution compliance period (defined as 40 days after the later of the commencement of the offering and the completion of the distribution of the Notes, and except in either case in accordance with Regulation S, it will do so only (a)(i) outside the United States in compliance with Rule 903 or 904 under the U.S. Securities Act or (ii) to a QIB in compliance with Rule 144A and (b) in accordance with all applicable U.S. state securities laws; and it acknowledges that the Regulation S Global Notes will bear a legend to the following effect unless otherwise agreed to by the Issuer: “THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY OTHER APPLICABLE U.S. STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PURCHASE AGREEMENT AND PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT. THIS LEGEND SHALL CEASE TO APPLY UPON THE EXPIRY OF THE PERIOD OF 40 DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING AND THE COMPLETION OF THE DISTRIBUTION OF ALL OF THE NOTES.”;
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8. that either (a) it is not acquiring or holding the Notes with the assets of (i) an “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that is subject to Title I of ERISA, (ii) a “plan” that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), (iii) any entity deemed under ERISA to hold “plan assets” of any of the foregoing by reason of an employee benefit plan’s or plan’s investment in such entity or (iv) a governmental plan, church plan or non-U.S. plan subject to provisions under any federal, state, local, non-U.S. or other laws or regulations that are similar to the foregoing provisions of ERISA or the Code (“Similar Law”); or (b) the acquisition and holding of such Notes by it will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a similar violation under any applicable Similar Law; 9. that, if it is (a) an employee benefit plan subject to Title I of ERISA, (b) a plan or account subject to Section 4975 of the Code or (c) an entity deemed to hold “plan assets” of any such employee benefit plan, plan or account, a fiduciary acting on its behalf is causing it to purchase the Notes and such fiduciary: a. is a bank, an insurance carrier, a registered investment adviser, a registered broker-dealer or an independent fiduciary with at least $50.0 million of assets under management or control as specified in 29 CFR Section 2510.3-21(c)(1)(i) (excluding, in the case of an IRA, the owner or a relative of the owner of the IRA); b. is independent (for purposes of 29 CFR Section 2510.3-21(c)(1)) of us, the Guarantors, the Initial Purchasers and their and our respective affiliates (the “Transaction Parties”); c. is capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies, including the purchaser’s transactions with the Transaction Parties hereunder (the “Relevant Transactions”); d. has been advised that none of the Transaction Parties has undertaken or will undertake to provide impartial investment advice, or has given or will give advice in a fiduciary capacity, in connection with the Relevant Transactions; e. is a “fiduciary” under Section 3(21)(A) of ERISA or Section 4975(e)(3) of the Code, or both, as applicable, with respect to, and is responsible for exercising independent judgment in evaluating, the Relevant Transactions; and f. understands and acknowledges the existence and nature of the underwriting discounts, commissions and fees, and any other related fees, compensation arrangements or financial interests, in connection with the Relevant Transactions; and understands, acknowledges and agrees that no such fee or other compensation is a fee or other compensation for the provision of investment advice, and that none of the Transaction Parties, nor any of their respective directors, officers, members, partners, employees, principals or agents has received or will receive a fee or other compensation from the purchaser or such fiduciary for the provision of investment advice (rather than other services) in connection with the Relevant Transactions, provided that, in the event the regulation under Section 3(21) of ERISA issued by the U.S. Department of Labor on April 8, 2016 is no longer in effect, the representations in this paragraph 9 will be deemed to be no longer in effect, provided that such purchaser will be deemed to have represented and warranted that none of the Transaction Parties has acted as such purchaser’s fiduciary in connection with the Relevant Transactions; and 10. that the Issuer and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that if any of such acknowledgements, representations or agreements made by it are no longer accurate, it shall promptly notify the Issuer; and if it is acquiring any Notes as a fiduciary or agent for one or more accounts it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION Each purchaser of the Notes from the Initial Purchasers will be furnished a copy of this Offering Memorandum and any related amendments or supplements to this Offering Memorandum. Each person receiving this Offering Memorandum acknowledges that: (1) such person has been afforded an opportunity to request from us, and to review and has received, all additional information considered by it to be necessary to verify the accuracy and completeness of the information herein; (2) such person has not relied on the Initial Purchasers or any person affiliated with any of the Initial Purchasers in connection with its investigation of the accuracy of such information or its investment decision; and (3) except as provided pursuant to paragraph (1) above, no person has been authorized to give any information or to make any representation concerning the Notes offered hereby other than those contained herein and, if given or made, such other information or representation should not be relied upon as having been authorized by us or the Initial Purchasers. For so long as any of the Notes remain outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the U.S. Securities Act, we will, during any period in which it is not subject to Section 13 or Section 15(d) under the U.S. Exchange Act, make available to any holder or beneficial holder of a Note, or to any prospective purchaser of a Note designated by such holder or beneficial holder, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the U.S. Securities Act, upon the written request of any such holder or beneficial owner. Any such request should be directed to our Investor Relations department by phone at 1 (866) 296–4232, or by email at [email protected]. Upon request, we will provide you with copies of the Indenture and the form of the Notes. You may request copies of such document by contacting our Investor Relations department by phone at 1 (866) 296–4232, or by email at [email protected]. We are a public limited company incorporated under the laws of England and Wales, and we file annual reports and other information with the SEC. You can read and copy any our material files with the SEC at its Public Reference Room at 100 F Street, NE, Washington, DC, 20549 USA. You can obtain information about the operation of the SEC’s Office of Investor Education and Advocacy by calling the SEC at 1 (800) SEC– 0330. The SEC also maintains a website that contains information we file electronically with the SEC, which you can access over the Internet at http://www.sec.gov. The information on the SEC’s website is not incorporated by reference into this Offering Memorandum. You may request a copy of our SEC filings at no cost, by writing us at the following address: International Game Technology PLC, c/o IGT Global Solutions Corporation, IGT Center, 10 Memorial Boulevard, Providence, RI, 02903–1160 USA; by phone at 1 (866) 296–4232; or by email at [email protected].
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ENFORCEMENT OF CIVIL LIABILITIES We are a public limited company incorporated under the laws of England and Wales with our registered office in London, England, and with our principal executive offices located in London, England; Providence, Rhode Island; Rome, Italy; and Las Vegas, Nevada. England and Wales The United States and the United Kingdom do not have a treaty providing for the reciprocal recognition and enforcement of court judgments (as opposed to arbitration awards) in civil and commercial matters. Consequently, a final judgment rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon U.S. federal securities laws, would not be automatically be recognized or enforceable in England and Wales. To enforce any such U.S. judgment in England, proceedings must first be initiated before a court of competent jurisdiction in England. In such an action, the English court would not generally reinvestigate the merits of the original matter decided by the U.S. court and it would usually be possible to obtain summary judgment on such a claim (assuming that there is no good defense to it). Recognition and enforcement of a U.S. judgment by an English court in such an action is conditional upon (among other things) the following:
the relevant U.S. court having had, at the time when proceedings were served, jurisdiction over the original proceedings according to English conflicts of laws rules;
the U.S. judgment being final and conclusive on the merits in the sense of being final and unalterable in the court which pronounced it and being for a definite sum of money; and
the U.S. judgment not being for a sum payable in respect of taxes, or other charges of a like nature or in respect of a penalty or fine or otherwise based on a U.S. law that an English court considers to relate to penal, revenue or other public law. An English court may refuse to enforce such a judgment if the court is satisfied that:
the U.S. judgment contravenes public policy in England and Wales;
the U.S. judgment has been arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained, is otherwise specified in or in accordance with Section 5 of the Protection of Trading Interests Act of 1980 or is based on measures designated by the Secretary of State under Section 1 of the Protection of Trading Interests Act of 1980;
the U.S. judgment has not been obtained by fraud or in breach of English principles of natural justice;
the U.S. judgment is (i) a judgment on a matter previously determined by an English court or another court whose judgment is entitled to recognition in England; or (ii) a judgment which conflicts with an earlier judgment of such court;
the U.S. judgment has been satisfied in full;
the U.S. judgment cannot be enforced in the jurisdiction in which the judgment was given;
the English enforcement proceedings were not commenced within the relevant limitation period;
the U.S. judgment was obtained contrary to an agreement for the settlement of disputes under which the dispute in question was to be settled otherwise than by proceedings in a U.S. court (to whose jurisdiction the judgment debtor did not submit); or
the U.S. judgment is subject to a pending or proposed appeal. Only subject to the foregoing may investors be able to enforce in England judgments that have been obtained from U.S. federal or state courts. Notwithstanding the preceding, we cannot assure you that those judgments will be recognized or enforceable in England and Wales. In addition, we cannot assure you whether an English court would accept jurisdiction and impose civil liability if the original action was commenced in England, instead of the United States, and predicated solely upon U.S. federal securities laws.
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Italy Subject to the qualifications described below, recognition and enforcement in Italy of final judgments of U.S. courts, including judgments obtained in actions predicated upon the civil liability provisions of the U.S. federal securities laws, may not require retrial on the merits and will be enforceable in Italy: provided that pursuant to Article 64 of Italian Law No. 218 of May 31, 1995, among others, the following conditions are met:
the relevant U.S. court which rendered the judgment had jurisdiction upon the matter in accordance with Italian law principles of jurisdiction and have rendered a final and binding judgment, not subject to any further appeal (passato in giudicato);
the relevant summons and complaints have been appropriately served on the defendant in accordance with applicable U.S. law and no fundamental right of the defendant has been violated during the proceedings;
the parties to the proceeding appeared before the court in accordance with U.S. law or, in the event of a party’s failure to appear before the court, the U.S. court declared such default in accordance with U.S. law;
there is no conflicting final judgment rendered by an Italian court or an action pending in Italy that commenced prior to the commencement of the proceedings before the U.S. court among the same parties and arising from the same facts and circumstances; and
the content of the U.S. judgment does not violate Italian public policy (ordine pubblico). Furthermore, according to Article 67 of Italian Law No. 218 of May 31, 1995, when it is necessary to proceed with judicial enforcement of a foreign decision, any interested party may request that the Court of Appeal of the place where the decision has to be enforced ascertains the existence of the requirements for the recognition. The applicable procedure is a summary proceeding: the plaintiff must file with the Court of Appeal a petition, which shall then be served to the party against which the execution of the foreign decision is requested. The competent Court of Appeal does not consider the merits of the case but reviews exclusively the existence of all the requirements set out above (including the requirement that the judgment rendered by the U.S. federal or state court is not contrary to public order in Italy). Except for family law matters, Italian courts do not generally resort to use the concept of public order to deny enforcement of a foreign decision (both for procedural and substantive reasons), except if an Italian fundamental principle, as provided in the Italian Constitution or an international conventions have been infringed. In original actions brought before Italian courts, there is doubt as to the enforceability of liabilities or remedies based solely on the U.S. federal securities laws. In addition, in original actions brought before Italian courts, Italian courts may apply not only Italian rules of civil procedure, but also certain substantive provisions of Italian law that are regarded as mandatory and may refuse to apply U.S. law provisions or grant some of the remedies sought (e.g., punitive damages) if the relevant application violates any Italian public policy (ordine pubblico) or any mandatory provisions of Italian law.
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CERTAIN INSOLVENCY LAW CONSIDERATIONS AND CERTAIN ITALIAN LAW CONSIDERATIONS IN RELATION TO GUARANTEES AND SECURITY INTERESTS The following is a summary of certain considerations under the insolvency laws of the European Union, the United Kingdom, England and Wales, the United States and Italy and certain Italian law considerations in relation to guarantees and security interests. It is a summary only, and does not purport to be complete or to discuss all of insolvency law considerations or all considerations that may affect the validity and enforceability of the Guarantees or the security interests in the Collateral. Bankruptcy, insolvency or similar proceedings could potentially be initiated under the laws of the jurisdiction of organization of a future guarantor of the Notes or another jurisdiction. Prospective investors should consult their own legal advisors with respect to such limitations and considerations. Insolvency Law Considerations European Union We and certain of the Guarantors are incorporated or organized under the laws of a member state of the European Union (each member state of the European Union, other than Denmark, a “Member State”). Pursuant to the Regulation of the European Parliament and of the Council (EU) N°2015/848 of May 20, 2015 on insolvency proceedings (the “EU Insolvency Regulation”), the court of the Member State within the territory of which a debtor has its “centre of main interests” (as that term is used in Article 3(1) of the EU Insolvency Regulation, “COMI”) shall have jurisdiction to open “main” insolvency proceedings in relation to such debtor. A court in such jurisdiction would be entitled to open the types of insolvency proceedings referred to in Annex A to the EU Insolvency Regulation. “Secondary” or “territorial” proceedings may be opened in other Member States where a debtor has an “establishment” (being a place of operations in such Member State, where it carries out a non-transitory economic activity with human means and goods). “Secondary” proceedings are insolvency proceedings opened following the opening of “main” proceedings in another Member State. “Territorial” proceedings are insolvency proceedings opened where (a) insolvency proceedings under Article 3(1) cannot be opened because of the conditions laid down by the law of the Member State within the territory of which the centre of the debtor’s main interests is situated; or (b) the opening of territorial insolvency proceedings is requested by: (i) a creditor whose claim arises from or is in connection with the operation of an establishment situated within the territory of the Member State where the opening of territorial proceedings is requested; or (ii) a public authority which, under the law of the Member State within the territory of which the establishment is situated, has the right to request the opening of insolvency proceedings. The EU Insolvency Regulation provides that any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to the EU Insolvency Regulation must be recognized in each other Member State from the time that it becomes effective pursuant to the law of that Member State. Moreover, the judgment opening “main” proceedings must produce the same effects in each other Member State as under the law of the Member State opening the proceedings, unless otherwise provided for in the EU Insolvency Regulation and for as long as no “secondary” proceedings are opened in such other Member State. “Secondary” or “territorial” proceedings are restricted in their effect to the assets of the debtor situated in the territory of such Member State. If the debtor does not have an establishment in any other Member State, no court of any other Member State has jurisdiction to open “secondary” or “territorial” proceedings in respect of such debtor under the EU Insolvency Regulation. The terms “court” and “judgment opening insolvency proceedings” have technical meanings under Article 2(6) and Article 2(7), respectively, of the EU Insolvency Regulation, which in practice may be different than the ordinary meanings given to those terms. The determination of where a debtor has its COMI is a question of fact on which the courts of the different Member States may have differing and conflicting views. There is a rebuttable presumption under Article 3(1) of the EU Insolvency Regulation that a debtor has its COMI in the Member State where its registered office is located. COMI is not a static concept and has been addressed through the EU Insolvency Regulation and in the jurisprudence of the European Court of Justice (“ECJ”) relating to Council Regulation (EC) no. 1346/2000. The rebuttable presumption provided by Article 3(1) of the EU Insolvency Regulation does however not apply in case the debtor has moved its registered office to another Member State within three months before the opening of the insolvency proceedings. According to Recital 30 of the EU Insolvency Regulation’s preamble, this presumption may also be rebutted where the debtor’s central administration is located in a Member State other than the one of its registered office and where a comprehensive assessment of
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all the relevant factors established, in a manner that is ascertainable by third parties, that the debtor’s actual center of management and supervision and of the management of its interests is located in another Member State. In addition, the second sentence of Article 3(1) of the EU Insolvency Regulation provides that the COMI of a debtor should correspond to the place where the debtor conducts the administration of its interests on a regular basis and “is ascertainable by third parties.” In that respect, factors such as the place where board meetings are held, the location from which the company conducts the larger part of its business and the location where the large majority of the company’s creditors reasonably perceives the center of the company’s business operations to be may all be relevant in the determination of the location of the COMI of the company. Case law has confirmed that a debtor’s COMI may move from one jurisdiction to another jurisdiction if the place where it administers its interests on a regular basis is relocated to such other jurisdiction. In the event that we or any of our subsidiaries experience financial difficulty, it is not possible to predict with certainty in which jurisdiction or jurisdictions insolvency or similar proceedings would be commenced, or the outcome of such proceedings. Applicable insolvency laws may affect the enforceability of our obligations. United Kingdom; England and Wales We are a public limited company incorporated under the laws of England and Wales. In the event of an insolvency event affecting us, it is possible that insolvency proceedings would be initiated in England and Wales, although it is possible that insolvency proceedings would be initiated elsewhere. Formal insolvency proceedings under the laws of England and Wales may be initiated in a number of ways, including (a) by the debtor, its directors, or any of its creditors making an application to court for administration proceedings; (b) by the debtor, its directors, or any creditor holding security over all or substantially all of the debtor’s assets under a qualifying floating charge, appointing an administrator through an out-of-court process; (c) by the debtor, its directors, or any creditor filing a petition to wind up the company; (d) the company’s members resolving to place the company into liquidation; or (e) the debtor or its creditors proposing a company voluntary arrangement. A company may be wound up by the court or pursuant to a resolution of its members if it is unable to pay its debts, among other reasons. A company may be placed into administration if it is, or is likely to become, unable to pay its debts, and the administration is reasonably likely to achieve one of three statutory purposes (as described further below). A company may enter into a company voluntary arrangement with the support of an appropriate majority of its creditors, whether or not it is unable to pay its debts. A company may also propose a scheme of arrangement with its members or creditors, which if approved by the requisite majority and sanctioned by the court would become binding upon the company and its members and creditors (as applicable), including dissenting members and creditors. The ability of a company to enter into administration, liquidation, or to propose a company voluntary arrangement or scheme of arrangement, or for such a company or its creditors to benefit meaningfully from a company doing any of the foregoing, may be affected (positively or negatively) by applicable cross- border insolvency and other laws, including the EU Insolvency Regulation. Insolvency Under the U.K. Insolvency Act 1986, as amended (the “U.K. Insolvency Act”), a company is unable to pay its debts if it is insolvent on a “cash-flow” basis (unable to pay its debts as they fall due), if it is insolvent on a “balance-sheet” basis (the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities), if it fails to satisfy a creditor’s statutory demand for a debt exceeding £750 or if it fails to satisfy in full a judgment debt (or similar court order). Administration The U.K. Insolvency Act empowers English courts to make an administration order in respect of companies incorporated under the laws of England and Wales, companies incorporated under the laws of another EEA Member State or Denmark, and companies not incorporated under the laws of an EEA Member State but having their COMI in such a Member State. Such companies, their, directors, and the holder of a qualifying floating charge over all or substantially all of the debtor’s assets may also commence administration through an out-of-court process, subject to certain exceptions pursuant to the U.K. Insolvency Act.
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During the administration (in general) no proceedings or other legal process may be commenced or continued against the company, or security enforced over the company’s property, except with permission of the court or the consent of the administrator. The administration of a company must achieve one of the following statutory objectives: (1) the rescue of the company (as distinct from the business carried on by the company) as a going concern (the primary objective); (2) the achievement of a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration) (the second objective); or (3) the realization of some or all of the company’s property to make a distribution to one or more secured or preferential creditors (the third objective). An administrator must attempt to achieve the objectives of administration in order, unless he thinks ether that it is not reasonably practicable to achieve the primary objective, or that the secondary objective would achieve a better result for the company’s creditors as a whole. Therefore, the administrator cannot pursue the third objective unless he thinks that it is not reasonably practicable to achieve either the first objective or the second objective and that it will not unnecessarily harm the interests of the creditors of the company as a whole to pursue the third objective. Liquidation/Winding-Up Liquidation is a company dissolution procedure under which the assets of the company (to the extent that they are not subject to any security interest) are realized and distributed by the liquidator to those creditors whose claims are not satisfied by any permitted enforcement of their security interest (if any) on a pari passu basis, subject to any contractual subordination (or similar) provisions and statutory priorities set out in the U.K. Insolvency Act and related legislation. At the end of the liquidation process, the company will be dissolved. In the case of a liquidation commenced by way of a court order, no legal proceedings or other legal actions may be commenced or continued against the company or its property except by leave of the court and subject to such terms as the court may impose. Under English insolvency law, a liquidator has the power to disclaim any onerous property, which consists of any unprofitable contract and any other property of the company that cannot be sold, readily sold, or may give rise to a liability to pay money or perform any other onerous act. A contract may be unprofitable if it gives rise to prospective liabilities and imposes continuing financial obligations on the company that may be detrimental to creditors. However, this power does not apply to a contract all the obligations under which have been performed nor can it be used to disturb accrued rights and liabilities. Company Voluntary Arrangement A company voluntary arrangement is a formal procedure under the U.K. Insolvency Act which enables a company to agree with its creditors a composition in satisfaction of its debts or a scheme of arrangement of its affairs which can determine how its debts should be paid and in what proportions. It requires the approval of a majority in excess of 75% in value of the creditors of the company present in person or by proxy and voting at a meeting on the resolution to approve the company voluntary arrangement. Secured creditors cannot vote their secured claim but a secured creditor’s rights cannot be compromised by a company voluntary arrangement without its consent. Furthermore the rights of a secured creditor to enforce its security are unaffected by the existence of a company voluntary arrangement unless a moratorium exists as referred to below when certain enforcement actions may be restricted. A resolution approving a company voluntary arrangement will be invalid if those creditors voting against it include more than half in value of the creditors of the relevant company, for these purposes counting only those creditors (a) to whom notice of the meeting was sent; (b) whose votes were not left out of account due to no written claim form having been received at or prior to the meeting, or the claim or part of it being secured (including on a current bill of exchange or promissory note); and (c) who are not, to the best of the chairman’s belief, persons connected with the company. If a company voluntary arrangement is approved, it binds all creditors of the company who were entitled to vote at the meeting (whether or not they were present or represented at it) or would have been so entitled had they received notice of the meeting, subject that creditors have the right to apply to the court to challenge the approval of a company voluntary arrangement.
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A company voluntary arrangement also requires the approval of more than 50% in value of the company’s members present in person or by proxy and voting at a meeting on the resolution to approve the company voluntary arrangement. However, if the outcome of the meeting of members differs from the outcome of the meeting of creditors, the decision of the creditors will prevail. Like creditors, members also have the right to apply to the court to challenge the approval of a company voluntary arrangement. “Small companies” (as defined in section 382 of the U.K. Companies Act, but subject to variation by order of the Secretary of State) are eligible to apply for a 28 day moratorium on claims when proposing a company voluntary arrangement. Certain categories of company are expressly prevented from seeking such a moratorium, including companies that have incurred or are expected to incur a debt of at least £10.0 million under a capital market arrangement which involves the issuance of a capital market investment. The categories of company which are prevented from applying for a moratorium may be varied at any time by order of the Secretary of State. Scheme of Arrangement A scheme of arrangement is a court approved compromise or arrangement between a company and its creditors or members. It is a company law procedure, rather than a form of insolvency proceeding. A company may propose a scheme of arrangement under English law if it is liable to be wound up in England and Wales. This includes companies incorporated under the laws of England and Wales, and also other companies which possess a “sufficient connection” to the jurisdiction, which may include companies whose COMI is in England and Wales, and companies whose obligations are subject to English law and jurisdiction. Schemes can be utilized by companies to provide for a modification or adjustment of the rights of the company’s creditors or members which, if approved, will be binding on all creditors or members. In brief, there are two different types of schemes: members’ schemes and creditors’ schemes. Before either type of scheme will become effective it must be approved by a majority in number, representing 75% in value, of the members or creditors, or affected class(es) thereof (as applicable), present and voting at a duly convened meeting pursuant to an order of the court; and be sanctioned at a subsequent hearing by the court. In determining whether to sanction a scheme, the court will consider whether the terms of the statute have been complied with, whether the class(es) affected by the scheme were fairly represented by those who attended the relevant meeting(s), and whether the arrangement as a whole is such as an intelligent and honest person, being a member of the class concerned and acting in respect of their interest, might reasonably approve. A members’ scheme will typically involve a restructuring of the rights of a company’s members. Once approved, the scheme will be binding on all members (including dissenting members), or if applicable the whole class of members whose rights were affected by the scheme. A creditors’ scheme may involve (among other things) a proposal to defer, compromise, extinguish, or replace the company’s debts. Once approved, the scheme will be binding on all creditors, including dissenting creditors, or if applicable the whole class of creditors whose rights were affected by the scheme. Schemes are extremely flexible and can be utilized to implement substantially any arrangement relating to the rights of members or creditors against the company, including secured creditors. A debtor’s decision to propose a scheme of arrangement will not automatically give rise to a stay or moratorium on proceedings against that debtor or its property. However, the court has previously exercised its inherent discretion to grant a stay on proceedings to allow a scheme to be implemented. Challenges to Transactions There are circumstances under English insolvency law in which the entry by a company into a transaction, including (without limitation) the granting by a company of security or guarantees, can be challenged. In most cases, this will only arise if the company is placed into administration or liquidation within a specified period of the granting of the guarantee and security. We cannot be certain that in the event that the onset of a company’s insolvency is within any of the requisite time periods set out below, any entry by such company into a transaction (including, without limitation, its grant of any security interest or guarantee) would not be challenged; or that a court would uphold the transaction as valid.
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Onset of insolvency The date of the onset of insolvency, for the purposes of transactions at an undervalue, preferences and invalid floating charges (all discussed below), depends on the insolvency procedure in question. In administration, the onset of insolvency is the date on which (a) the court application for an administration order is issued or (b) the notice of intention to appoint an administrator is filed at court, or (c) otherwise, the date on which the appointment of an administrator takes effect. In a compulsory liquidation the onset of insolvency is the date the winding-up petition is presented to court, whereas in a voluntary liquidation it is the date the company passes a winding-up resolution. Where liquidation follows administration, the onset of insolvency will be as for the initial administration. Connected persons A person is connected with a company granting for the purposes of transactions at an undervalue, preferences and invalid floating charges is a party who is (a) a director of the company, (b) a shadow director, (c) an associate of such director or shadow director, or (d) an associate of the relevant company. A party is associated with an individual if they are (a) a relative of the individual, (b) the individual’s husband, wife or civil partner, (c) a relative of the individual’s husband, wife or civil partner, or (d) the husband, wife or civil partner of a relative of the individual. A party is associated with a company if they are employed by that company. A company is associated with another company if (a) the same person has control of both companies, or (b) it is controlled by a person, and that person’s associates have control of the other company, or (c) it is controlled by a group of two or more persons who also control the other company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person of whom he is an associate. Transaction at an Undervalue Under English insolvency law, a liquidator or administrator of a company may apply to the court for an order to set aside a transaction entered into by such company, if such liquidator or administrator believes that the transaction was entered into at an undervalue. A company enters into a transaction at an undervalue if it makes a gift to a person, if the company receives no consideration, or if the company receives consideration of significantly less value, in money or money’s worth, than the consideration given by such company in return. A transaction may only be set aside for being at an undervalue if (a) the transaction was entered into within two years of the onset of insolvency; and (b) the company was at the time of such transaction, or as a result of it, unable to pay its debts within the meaning of Section 123 of the U.K. Insolvency Act. It is for the liquidator or administrator to demonstrate that the company was unable to pay its debts, unless the relevant transaction was with a person connected with the company, in which case there is a presumption of insolvency and the connected person must demonstrate the solvency of the company in such proceedings. Further, an English court will not intervene if it is satisfied that the company entered into the transaction in good faith and for the purpose of carrying on its business and that, at the time it did so, there were reasonable grounds for believing the transaction would benefit the company. If the court determines that the transaction was a transaction at an undervalue then, subject as set out above, the court can make such order as it thinks fit to restore the position to what it would have been if the transaction had not been entered into. Preference Under English insolvency law, a liquidator or administrator of a company could apply to the court for an order to set aside a transaction if such liquidator or administrator believed that the entry into such a transaction constituted a preference. A transaction will constitute a preference if it has the effect of putting an existing creditor of the company (or an existing surety or guarantor for any of the company’s debts or liabilities) in a better position (in the event of the company going into insolvent liquidation) than such creditor, surety or guarantor would otherwise have been in had that transaction not been entered into.
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A preference will only be set aside if (a) it was given to a person who is connected with the company, other than by reason only of their being an employee, and it was given within two years of the onset of insolvency; or (b) it was given to a person who was not connected, within six months of the onset of insolvency; and in either case (c) the company was at the time of such transaction, or as a result of it, unable to pay its debts within the meaning of Section 123 of the U.K. Insolvency Act. It is for the liquidator or administrator to demonstrate that the company was unable to pay its debts, unless the relevant transaction was with a person connected with the company, in which case there is a presumption of insolvency and the connected person must demonstrate the solvency of the company in such proceedings. Further, the court will not set aside a preference unless the company making that preference was influenced by a desire to produce the preferential effect. It is again for the liquidator or administrator to prove that the company was influenced by a desire to produce the preferential effect, unless the preference was given to a person connected with the company, other than by reason only of being its employee, in which case there is a presumption that the company was influenced by a desire to produce the preferential effect, and the connected person must demonstrate in such proceedings that there was no such desire. If the court determines that the transaction was a preference then, subject as set out above, the court has very wide powers for restoring the position to what it would have been if that preference had not been given. Transaction Defrauding Creditors Under English insolvency law, where it can be shown that a transaction was at an undervalue and was made for the purposes of putting assets beyond the reach of a person who is making, or may make, a claim against a company, or of otherwise prejudicing the interests of a person in relation to the claim that that person is making or may make, the transaction may be set aside by the court as a transaction defrauding creditors. This provision may be used by any person who claims to be a “victim” of the transaction and is not therefore limited to liquidators or administrators. There is no time limit in English insolvency law within which the challenge must be made, and the relevant company does not need to be insolvent at the time of the transaction. If the court determines that the transaction was a transaction defrauding creditors, the court can make such orders as it thinks fit to restore the position to what it would have been if the transaction had not been entered into and to protect the interests of the victims of the transaction. Avoidance of Floating Charges Under English insolvency law, floating charges created by a company within a period of one year prior to the onset of insolvency (or two years in the case of a floating charge in favor of a connected person) at a time when the company was unable to pay its debts or became unable to do so as a consequence of the transaction, will be invalid, except to the extent of the value of (a) the money paid to; (b) the goods or services supplied to; or (c) any discharge or reduction of any debt of, the relevant English company at the same time as or after the creation of the floating charge (plus certain interest) (the “Consideration”). The requirement for an English company to be insolvent at the time of granting the floating charge or becoming insolvent as a consequence of doing so does not apply where the floating charge is granted to a connected person. An administrator or liquidator (as applicable) does not need to apply to court for an order declaring that a floating charge is invalid. Any floating charge created during the relevant time period is automatically invalid, except to the extent of the value of the Consideration, whether the relevant company is solvent or insolvent at the time of grant. Re-characterization of Fixed Charge There is a possibility that a court could find that the fixed charges expressed to be created by the security documents governed by English law properly take effect as floating charges as the description given to them as fixed charges is not determinative. Whether the purported fixed charges will be upheld as fixed charges rather than floating charges will depend, among other things, on whether the secured party has the requisite degree of control over the English obligor’s ability to deal in the relevant assets and the proceeds thereof and, if so, whether such control is exercised by the holder of the security, in practice. Where an English obligor is free to deal with the assets that are the subject of a purported fixed charge in its discretion and without the consent of the chargee, the court would be likely to hold that the charge in question constitutes a floating charge, notwithstanding that it may be described as a fixed charge.
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Limitation on Enforcement The entry by a company into a transaction must be allowed by the company’s memorandum and articles of association. To the extent that the above do not allow such an action, there is the risk that the grant of the guarantee and the subsequent security can be found to be void and the respective creditor’s rights unenforceable. Some comfort may be obtained for third parties if they are dealing with a company in good faith; however, the relevant legislation is not without difficulties in its interpretation. Further, corporate benefit must be established for a company by virtue of entering into the proposed transaction. Section 172 of the U.K. Companies Act provides that a director must act in the way that he considers, in good faith, would be most likely to promote the success of the company the benefit of its members as a whole. If the directors enter into a transaction where there is no or insufficient commercial benefit, they may be found as abusing their powers as directors and such a transaction may be vulnerable to being set aside by a court. Cross Border Insolvency Pursuant to the EU Insolvency Regulation, where a company incorporated under the laws of England and Wales has its COMI in a Member State of the EU other than the United Kingdom, then the main insolvency proceedings for such company should be opened in the Member State in which its center of main interest is located (rather than England) and be subject to the laws of that Member State. There is a rebuttable presumption that the center of main interests will be in the jurisdiction where the company’s registered office is located. To the extent that an obligation of the United Kingdom under the EU Insolvency Regulation conflicts with an obligation under any other applicable regime, the requirements of the EU Insolvency Regulation will prevail. In addition, the Cross Border Insolvency Regulations 2006 (SI 2006/1030) (the “CBIR”) implements the United Nations Commission on International Trade Law Model Law on Cross Border Insolvency (the “UNCITRAL Model Law”) in Great Britain (being England, Scotland and Wales). Certain jurisdictions other than England, Scotland and Wales have also adopted legislation implementing the UNCITRAL Model Law. The CBIR provides that where courts in foreign jurisdictions have opened insolvency proceedings in respect of a company incorporated under the laws of England and Wales, provided that the company has its center of main interests in such foreign jurisdiction, or where it has an “establishment” (being any place of operations in such foreign jurisdiction, where it carries out a non-transitory economic activity with human means and assets or services), the English court, as the case may be, will recognize the foreign insolvency proceedings and give effect to certain stays and suspensions on any proceedings or attachment attempted against the company in the United Kingdom. The U.K. Insolvency Act also requires the English courts to provide assistance to the courts of certain other “relevant territories” having parallel jurisdiction in relation to insolvency law. The courts have held that the purpose of this legislation, which is broadly drafted, is to prevent a foreign insolvency officer or a debtor’s creditors from needing to open separate proceedings in England and Wales, and to give them the remedies that they would have been entitled to if the equivalent proceedings had been opened there. Apart from the statutory regimes, there is a broad remit for the English courts to provide assistance under the common law to a foreign court or insolvency officer, where requested to do so by such foreign court or insolvency officer. Priority of Claims One of the primary functions of liquidation (and, where the company cannot be rescued as a going concern, one of the possible functions of administration) under United Kingdom law is to realize the assets of the insolvent company and to distribute the cash realizations made from those assets to its creditors. Under the U.K. Insolvency Act, creditors are placed into different classes and, with the exceptions and adjustments noted below, the proceeds from the realization of the insolvent company’s property applied in descending order of priority, as set out below. With the exception of the prescribed part (please see “—Prescribed Part”), distributions generally cannot be made to a class of creditors until the claims of the creditors in a prior ranking class have been repaid in full. Unless creditors have agreed otherwise, distributions are made on a pari passu basis, that is, the cash is distributed in proportion to the debts due to each creditor within a class.
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The general priority of claims on insolvency is as follows (in descending order of priority):
First ranking claims: holders of fixed charge security and creditors with a proprietary interest in specific assets in the possession (but not full legal and beneficial ownership) of the debtor but only to the extent of the realizations from those secured assets or with respect to the asset in which they have a proprietary interest;
Second ranking claims: expenses of the insolvent estate incurred during the relevant insolvency proceedings (there is a further statutory order of priority setting out the order in which expenses are paid);
Third ranking claims: preferential creditors. Preferential debts include (but are not limited to) debts owed by the insolvent company in relation to: (i) contributions to occupational and state pension schemes; (ii) wages and salaries of employees for work done in the four months before the insolvency date, up to a maximum of £800 per person; and (iii) holiday pay due to any employee whose contract has been terminated, whether the termination takes place before or after the insolvency date;
Fourth ranking claims: holders of floating charge security to the extent of the realizations from those secured assets, according to the priority of their security. This would include any floating charge that was stated to be a fixed charge in the document that created it but which, on a proper interpretation, was rendered a floating charge. However, before distributing asset realizations to the holders of floating charges, the prescribed part must be set aside for distribution to unsecured creditors (please see “—Prescribed Part”);
Fifth ranking claims: general unsecured creditors. However, any secured creditor not repaid in full from the realization of assets subject to its security can also claim the remaining debt due to it (a shortfall) from the insolvent estate as an unsecured claim;
Sixth ranking claims: subordinated creditors. Creditors whose claims are subordinated to the payment of all of the company’s other creditors; and
Seventh ranking claims: members. If after the repayment of all unsecured creditors in full, any remaining funds exist, these will be distributed to the members of the insolvent company. Prescribed Part An administrator, receiver (including administrative receiver) or liquidator of the company will be required to ring-fence a certain percentage of the proceeds of enforcement of assets subject to floating charge security for the benefit of unsecured creditors (the “Prescribed Part”). Under current law, and assuming that a company’s net property exceeds £10,000, this applies to 50% of the first £10,000 of net floating charge realizations and 20% of the remainder over £10,000, up to a maximum Prescribed Part of £600,000. The Prescribed Part must be made available to unsecured creditors unless the cost of doing so would be disproportionate to the resulting benefit to creditors. The Prescribed Part will not be available for any shortfall claims of secured creditors. Foreign Currency Under English insolvency law, where creditors are asked to submit formal proofs of claim for their debts, any debt of a company payable in a currency other than pounds sterling (such as euro in the case of the Notes) must be converted into pounds sterling at the “official exchange rate” prevailing at the date when the company went into liquidation or administration. This provision overrides any agreement between the parties. The “official exchange rate” for these purposes is the middle market rate in the London Foreign Exchange Market at close of business as published for the date in question or, if no such rate is published, such rate as the court determines.
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United States Under U.S. federal bankruptcy laws or comparable provisions of state insolvency or fraudulent transfer laws, under certain circumstances:
the granting of the Guarantees and the grant of security interests in the Collateral by entities subject to or organized under the laws of the United States or certain states thereof, including Delaware and Nevada (each, a “U.S. Guarantor”) could be avoided;
the holders of Notes could be required to repay some or all amounts received in connection with such Guarantee or Collateral;
claims in respect of such liens or obligations could be subordinated to some or all of the debtor’s debts and liabilities; and
the right of the Security Agent to foreclose on and dispose of the Collateral of a U.S. Guarantor upon an event of default under the Indenture is likely to be significantly impaired if such U.S. Guarantor commences U.S. bankruptcy proceedings before such foreclosure or disposal occurs. Federal and State Insolvency Proceedings The U.S. Guarantors may have operations that would subject them either to federal bankruptcy laws under Title 11 of the United States Code (the “U.S. Bankruptcy Code”) or any applicable state law insolvency proceedings. Proceedings under the U.S. Bankruptcy Code vary and provide a debtor with discretion in its pursuit of a liquidation or reorganization strategy. The U.S. Bankruptcy Code provides a detailed statutory framework that, among other things, contains terms or provisions relating to: (i) the automatic stay, the administration of a bankruptcy case, including the provision of “adequate protection” to secured creditors, terms for the use, sale or lease of property, standards for obtaining credit and the treatment of executory contracts and leases; (ii) creditors and claims, including filing proofs of claim, priority and allowance of claims, rights of secured creditors and subordination of claims; (iii) provisions relating to the creation of the bankruptcy estate, including: the scope of property of the estate, the ability to bring turnover and avoidance actions, liquidation under Chapter 7 of the U.S. Bankruptcy Code, reorganization under Chapter 11 of the U.S. Bankruptcy Code, and ancillary and cross-border insolvency cases under Chapter 15 of the U.S. Bankruptcy Code. As a general matter, Chapter 7 of the U.S. Bankruptcy Code provides for the orderly liquidation of the debtor’s assets by a trustee. Chapter 11 of the U.S. Bankruptcy Code is available to debtors who seek to rehabilitate their businesses and work out their obligations to creditors. Unlike in Chapter 7, the debtor in a Chapter 11 case typically remains in control of its assets and continues to operate its business during the course of the bankruptcy case. “Liquidating” Chapter 11 cases are also a frequently utilized alternative to Chapter 7 liquidations, when a debtor expects to sell all or substantially all of its assets, as it can result in a more orderly liquidation process and possibly greater preservation of value for creditors. Because bankruptcy proceedings tend to be fact-specific and vary case by case and because U.S. bankruptcy courts are courts of equity with broad discretionary powers, a detailed summary of all of the provisions of the U.S. Bankruptcy Code that could impact the Notes, the Guarantees or the Collateral is not contained herein. With respect to the effects and outcomes of proceedings under any applicable state insolvency laws (e.g., assignments for the benefit of creditors, receiverships or other state liquidation mechanisms) are fact-specific, vary from state to state and require an examination of both statutory and common law. Accordingly, the details of such proceedings are not described herein. To the extent more information is required, potential investors in the Notes should consult an insolvency professional familiar with U.S. and applicable state insolvency laws.
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Delay and Risks Associated in a Federal Bankruptcy Proceeding If a bankruptcy proceeding were to be commenced under the U.S. Bankruptcy Code by or against any U.S. Guarantor, it is likely that delays would occur in enforcing the Guarantees granted by the bankrupt U.S. Guarantor, because of specific provisions of the U.S. insolvency laws or a court’s application of general principles of equity. Federal bankruptcy laws or general principles of equity that possibly could result in the impairment of rights include, but are not limited to:
automatic stay;
avoidance of preferential transfers or fraudulent transfers by a trustee or debtor-in-possession, or by another party with standing to do so on behalf of the debtor’s estate;
substantive consolidation of the assets and liabilities of multiple entities;
limitations on the collectability of unmatured interest or attorney fees; and
forced restructuring of the debt securities issued by the bankrupt company, including reduced recovery of principal, reduced interest rates and extension of maturity dates, over the holders’ objections. As an initial matter, the commencement of a bankruptcy case operates as a stay, applicable to all creditors, of most litigation against the debtor and any efforts to collect prepetition claims, enforce existing liens or impose most new liens. The purpose of the stay is to provide the Chapter 11 debtor time to reorganize, or the Chapter 7 trustee protection under which to liquidate in an orderly fashion the debtor’s assets for the benefit of creditors. The automatic stay is also intended to shield a debtor from the pressures of creditor collection efforts. Among other things, the automatic stay prohibits (i) all collection efforts by creditors, (ii) the enforcement of prepetition judgments against the debtor or property of the estate, (iii) any act to create, perfect or enforce a lien against property of the estate and (iv) subject to certain exceptions, the set-off of prepetition debts owing to the debtor against debts owing by the debtor. The automatic stay ordinarily does not bar suits against non-debtor guarantors or co-obligors, nor does it enjoin payment under a letter of credit issued by a bank in favor of a creditor of the applicable debtor. Applicable federal bankruptcy laws generally do not permit the payment or accrual of interest, costs and attorneys’ fees for unsecured or “under-secured” claims. Fraudulent Transfer Issues Under the U.S. Bankruptcy Code or comparable provisions of state fraudulent transfer laws, the granting of Guarantees or the granting of security interests in the Collateral by a U.S. Guarantor could be avoided if, among other things, at the time such U.S. Guarantor issued the Guarantee or granted the security interest in the Collateral (as the case may be), such U.S. Guarantor (i) intended to hinder, delay or defraud any present or future creditor (i.e., actual fraud); or (ii) received less than reasonably equivalent value or fair consideration for the incurrence of such indebtedness and, in the case of (iii) either:
was insolvent or rendered insolvent by reason of such incurrence;
was engaged in a business or transaction for which such U.S. Guarantor’s remaining assets constituted unreasonably small capital; or
intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. Under the U.S. Bankruptcy Code, the “look-back” period for any such transactions is two years, and may be longer under state fraudulent transfer laws. The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the fraudulent transfer avoidance action. Generally, however, a U.S. Guarantor would be considered insolvent if:
the sum of its debts, including contingent liabilities, was greater than all of its assets, at a fair valuation;
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the present fair saleable value of its assets was less than the amount that would be required to pay its probable liabilities on its existing debts, including contingent liabilities, as they become absolute and mature (i.e., constructive fraud); or
it could not pay its debts as they became due. There can be no assurance as to what standard a court may apply in making solvency determinations, and different courts may reach different conclusions with regard to these issues. In an evidentiary ruling in the In re W.R. Grace & Co. bankruptcy case, the U.S. Bankruptcy Court for the District of Delaware held that, under the Uniform Fraudulent Transfer Act, whether a transferor is rendered insolvent by a transfer depends on the actual liabilities of the transferor, and not what the transferor knows about such liabilities at the time of the transfer. Therefore, under that court’s analysis, liabilities that are unknown, or that are known to exist but whose magnitude is not fully appreciated at the time of the transfer, may later be taken into account in the context of a determination of insolvency that occurs in the future. If the principle articulated by that court is upheld, it would make it very difficult to know whether a transferor is solvent at the time of transfer, and would increase the risk that a transfer may be determined in the future to have been fraudulent. By their terms, the Guarantee of each U.S. Guarantor will limit the liability of such U.S. Guarantor to the maximum amount it can pay without the Guarantee being deemed a fraudulent transfer. It is not assured, however, that this limitation will protect such Guarantees from fraudulent transfer challenges or, if it does, that the remaining amount due and collectible under such Guarantees would suffice, if necessary, to pay the Notes in full when due. In a recent Florida bankruptcy case, this kind of provision was found to be ineffective to protect a guarantee. In addition to the avoidance power that may be exercised in a U.S. bankruptcy proceeding, claims in respect of liens or obligations evidenced by the Guarantees or security interests in the Collateral may, in certain circumstances, be subordinated under the equitable subordination provisions of the U.S. Bankruptcy Code. Preference issues Any future pledge of collateral in favor of the creditors may be at risk of being be avoided in a bankruptcy proceeding if certain events or circumstances exist or occur, including, among others, if the U.S. Guarantor is insolvent at the time it pledges the collateral, if the pledge permits the pledgee to receive a greater recovery than it would otherwise receive in a hypothetical Chapter 7 liquidation, and if a bankruptcy proceeding in respect of the U.S. Guarantor is commenced within 90 days (or, in the case of an “insider” of the pledger, within one year) following the granting of such pledge. Italy Introduction The following is a brief description of certain aspects of insolvency law in Italy, which does not include special provisions applying to banks, insurance and other companies authorized to carry out certain reserved activities nor it provides a comprehensive description of insolvency laws application where publicly-owned companies are involved. Insolvency laws and regulations are currently being reviewed and significant amendments are expected in the near future. In particular, on October 11, 2017 the Italian Senate approved Law No. 155 dated October 19, 2017 pursuant to which it has authorized the government to carry out a substantial reform of Italian insolvency laws, on the basis of the guidelines provided therein. The main innovations, which must be implemented by the government within twelve months include: (i) the elimination of the term “bankrupt” (fallito) due to its negative connotation and its replacement with a reference to a judicial liquidation; (ii) new definition of state of crisis; (iii) the adoption of the same procedural framework to access the different insolvency procedures provided by law; (iv) express acknowledgement and adoption of the definition of debtor’s center of main interest as provided for in the Recast EU Insolvency Regulation; (v) a new set of rules concerning group restructurings; (vi) restrictions to the use of the pre-bankruptcy composition with creditors (concordato preventivo) in order to favor going-concern restructurings; (vii) a new preventive alert and mediation phase to avoid insolvency; and (viii) jurisdiction of specialized courts over proceedings involving large debtors. However, such reform has not been implemented yet.
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Certain Italian Insolvency laws The Italian Guarantor is incorporated under the laws of Italy and, in the event of an insolvency event affecting the Italian Guarantor, insolvency proceedings may be initiated in Italy. In Italy, the courts play a central role in the insolvency process and in-court procedures may be materially more complex and time-consuming than in equivalent situations in jurisdictions with which holders of Notes may be familiar. The following is a brief description of certain aspects of insolvency law in Italy. Certain provisions of Italian law have been amended or have entered into force only recently and, therefore, may be subject to further implementation or interpretations and have not been tested to date in the Italian courts. In this respect, the most recent reform has been approved by the Italian Government on June 23, 2015 through a Law Decree containing urgent reforms applicable to, among others, Italian bankruptcy law (the “Decree 83/2015”). The Decree 83/2015 entered into force in June 2015 and has been converted into law by Law No. 132/2015 (the “Law 132/2015”). Law 132/2015 entered into force on August 21, 2015. The two primary aims of Royal Decree No. 267 of March 16, 1942 (the main Italian bankruptcy legislation), as reformed and currently in force (the “Italian Bankruptcy Law”), are to liquidate the company’s assets and protect the goodwill of the going concern (if any) for the satisfaction of creditors’ claims as well as, in case of the “Prodi-bis” procedure or “Marzano” procedure, to maintain employment. These competing aims have often been balanced by selling businesses as going concerns and ensuring that employees are transferred along with the businesses being sold. However, the Italian Bankruptcy Law has been recently amended with a view to promoting rescue procedures rather than liquidation focusing on the continuity and survival of financially distressed businesses and enhancing pre-bankruptcy restructuring options. Under the Italian Bankruptcy Law, bankruptcy must be declared by a court, based on the insolvency (insolvenza) of a company upon a petition filed by the company itself, the public prosecutor or one or more creditors. Insolvency occurs when a company is no longer able to regularly meet its obligations as they become due. This must be a permanent, and not a temporary, status of insolvency for a court to hold that a company is insolvent. In cases where a company is facing financial difficulties or a temporary cash shortfall and, in general, financial distress, it may be possible for it to enter into out-of-court arrangements with its creditors; doing so may safeguard the existence of the company, but is susceptible to being reviewed by a court in the event of a subsequent insolvency, and possibly challenged as voidable transactions. In addition, the following forms of debt restructuring and bankruptcy are available under Italian law for companies in a state of crisis and for insolvent companies: Restructuring outside of a judicial process (concordati stragiudiziali) Restructuring generally takes place through a formal judicial process because it is more favorable for the company and because informal arrangements put in place as a result of an out-of-court restructuring are vulnerable to being reviewed by a court in the event of a subsequent insolvency and possibly challenged as voidable transactions. However, in cases where a company is solvent, but facing financial difficulties, it may be possible for it to enter into out-of-court arrangements with its creditors, which may safeguard the existence of the company. Out-of-Court Reorganization Plans (piani di risanamento) pursuant to Article 67, Paragraph 3(d) of the Italian Bankruptcy Law Out-of-court debt restructuring agreements are based on restructuring plans (piani di risanamento attestati) prepared by companies to restructure their indebtedness and to ensure the recovery of their financial condition. An independent expert appointed by the company has to verify the feasibility of the restructuring plan and the truthfulness of the business and accounting data provided by the company. The expert must possess certain specific professional requisites and qualifications and meet the requirements set forth by Article 2399 of the Italian Civil Code and may be subject to liability in case of misrepresentation or false certification. The terms and conditions of these plans are freely negotiable, provided that they are finalized at restructuring the company’s indebtedness and rebalancing its capital structure. Unlike in-court pre-bankruptcy agreement
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proceedings and debt restructuring agreements, out-of-court reorganization plans pursuant to Article 67, Paragraph 3(d) of the Italian Bankruptcy Law do not offer the company any protection against enforcement proceedings or precautionary actions of third-party creditors. The Italian Bankruptcy Law provides that, should these plans fail and the company subsequently declared bankrupt, the payments or acts carried out for the implementation of the reorganization plan, subject to certain conditions: (i) are not subject to claw-back action; and (ii) are exempted from certain potentially applicable criminal sanctions. Neither ratification by the court nor publication in the companies’ register are needed (although publication in the companies’ register is possible upon a company’s request and would allow for certain tax benefits) and, therefore, the risk of bad publicity or adverse judgments is lower than in case of an in-court pre-bankruptcy agreement or a debt restructuring agreement. Debt Restructuring Agreements with Creditors (accordi di ristrutturazione dei debiti) pursuant to Article 182–bis of the Italian Bankruptcy Law Out-of-court agreements for the restructuring of indebtedness entered into with creditors representing at least 60% of the outstanding company’s debts can be ratified by the court. An independent expert appointed by the company must assess the truthfulness of the business and accounting data provided by the company and declare that the agreement is feasible and, particularly, that it ensures that the debts of the non-participating creditors can be fully satisfied within 120 day term from: (i) the date of ratification of the agreement by the court, in the case of debts which are due and payable to the non-participating creditors as of the date of the sanctioning (omologazione) of the debt restructuring agreement by the court; and (ii) the date on which the relevant debts fall due, in case of receivables which are not yet due and payable to the non-participating creditors as of the date of the sanctioning (omologazione) of the debt restructuring agreement by the court. Only a company who is insolvent or in a state of crisis (i.e., facing financial distress which does not yet amount to insolvency) can initiate this process and request the court’s sanctioning (omologazione) of the debt restructuring agreement entered into with its creditors. The agreement is published in the companies’ register and is effective as of the day of its publication. Starting from the date of such publication and for 60 days thereafter, creditors cannot start or continue any interim relief or enforcement actions over the assets of the company and cannot obtain any security interest (unless agreed) in relation to pre-existing debts. The moratorium can be requested, pursuant to Article 182–bis, Paragraph 6 of the Italian Bankruptcy Law, by the company from the court pending negotiations with creditors (prior to the above-mentioned publication of the agreement), subject to the fulfilment of certain conditions. Such moratorium request must be published in the companies’ register and becomes effective as of the date of publication. The court, having verified the completeness of the documentation, sets the date for a hearing within 30 days of the publication and orders the company to supply the relevant documentation in relation to the moratorium to the creditors. In such hearing, the court assesses whether the conditions for granting the moratorium are in place and, if they are, orders that no interim relief or enforcement action may be started or continued, nor can security interests (unless agreed) be acquired over the assets of the company, and sets a deadline (not exceeding 60 days) within which the restructuring agreement has to be filed. The court’s order may be challenged within 15 days of its publication. Within the same time frame, an application for the concordato preventivo (as described below) may be filed, without prejudice to the effect of the moratorium. The Italian Bankruptcy Law does not expressly provide for any indications concerning the contents of the debt restructuring agreement. The plan can therefore provide, inter alia, either for the prosecution of the business by the company or by a third party, or the sale of the business to a third party, and may contain refinancing agreements, moratoria, write-offs or postponements of claims. The debt restructuring agreement may also contain a proposed tax settlement for the partial or deferred payment of certain taxes. Creditors and other interested parties may oppose the agreement within 30 days from the publication of the agreement in the companies’ register. The court will, after having settled the oppositions (if any), validate the agreement by issuing a decree, which may be appealed within 15 days of its publication. The Decree 83/2015, as amended by Law 132/2015, modified the basis for calculation of the 60% of the outstanding company’s debt threshold required for courts’ sanctioning of debt restructuring agreements (accordi di ristrutturazione dei debiti), easing the requirements with respect to financial creditors. Pursuant to the new Article 182–septies of the Italian Bankruptcy Law, introduced by the Decree 83/2015, as amended by Law 132/2015, companies whose financial indebtedness is at least 50% of their total
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indebtedness are entitled to enter into debt restructuring agreements obtaining the approval of financial creditors representing at least 75% of the aggregate financial claims of the relevant category and ask the court to declare such agreement binding on the dissenting financial creditors belonging to the same category (so called “cram down”), subject to certain conditions being met, including that treatment of dissenting creditors is not worse than under any other available alternative. If the abovementioned conditions are met, then the remaining 25% of non-participating financial creditors belonging to the same class of creditors are crammed down; however, crammed down creditors can challenge the deal and refuse to be forced into it, on the basis of the lack of homogeneity of the classes of creditors. Similarly, a standstill agreement (convenzione di moratoria) entered into between a company and financial creditors representing 75% of that company’s aggregate financial indebtedness would also bind the non-participating financial creditors, provided that an independent expert certifies the homogeneity of the classes and subject to certain conditions being met. The purpose is to prevent banks with modest credits from block restructuring operations involving more exposed bank creditors, resulting in the failure of the overall restructuring and the opening of a procedure. Financial creditors who did not participate in the agreement may challenge it within 30 days of receipt of the application. Such debt restructuring agreements and standstill agreements will not affect the rights of non-financial creditors (e.g., trade creditors) who cannot be crammed down and must be paid within 120 days if not participating in a scheme. The company may also enter into a standstill agreement with its creditors which are banks and financial intermediaries by which also the non-consenting banks and financial intermediaries are bound, provided that: (i) they have been informed of the ongoing negotiations and have been allowed to participate to such negotiations in good faith; and (ii) an expert meeting the requirements provided under Article 67, paragraph 3, letter (d) of the Italian Bankruptcy Law certifies that the non-consenting banks and financial intermediaries have legal status and economic interests similar to those of the banks and financial intermediaries which have agreed to the standstill agreement. The banks and financial intermediaries which have not agreed to the standstill agreement may file an objection (opposizione) to it within 30 days after having been notified of the same. In no case the debt restructuring agreement provided under article 182-septies of the Italian Bankruptcy Law or the standstill agreement may impose new obligations, the granting of new over-draft facilities, the maintenance of the possibility to utilize existing facilities or the utilization of new facilities on third party creditors. Pursuant to Article 182–quater of the Italian Bankruptcy Law, financing granted to the company pursuant to the approved debt restructuring agreement (or a court-supervised Pre-Bankruptcy Composition with Creditors) enjoy priority status in cases of subsequent bankruptcy (such status also applies to financing granted by shareholders, but only up to 80% of such financing). Financing granted “in view of” (i.e., before) presentation of a petition for a debt restructuring agreement or a court-supervised Pre-Bankruptcy Composition with Creditors may be granted such priority status provided that it is envisaged by the relevant plan or agreement and that such priority is expressly provided for by the court at the time of approval of the plan or sanctioning (omologazione) of the agreement. Pursuant to the new Article 182–quinquies of the Italian Bankruptcy Law, the court, pending the sanctioning (omologazione) of the agreement pursuant to Article 182–bis, Paragraph 1, or after the filing of the petition pursuant to Article 182–bis, Paragraph 6, or a petition for a concordato preventivo, also pursuant to Article 161, Paragraph 6, may authorize the company to: (i) incur new pre-deductible indebtedness subject to authorization by the court and if an expert certifies that such financing is functional to the overall restructuring process; (ii) secure such indebtedness via in rem securities (garanzie reali), provided that the expert appointed by the company, having verified the overall financial needs of the company until the sanctioning (omologazione), declares the aim of the new financial indebtedness results in a better satisfaction of the creditors; and (iii) pay debts deriving from the supply of services or goods, already payable and due, provided that, the expert declares that such payment is essential for the keeping of the company’s activities and to ensure the best satisfaction for all creditors. In addition, according to the provisions of the Decree 83/2015, as amended by Law 132/2015, the aforementioned authorization may be given also before the filing of the additional documentation required pursuant to Article 161, Paragraph 6 of the Italian Bankruptcy Law.
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The provision of Article 182–quinques of the Italian Bankruptcy Law applies to both debt restructuring agreement and to the court-supervised pre-bankruptcy compositions with creditors (concordato preventivo) outlined below. Furthermore, according to the Article 1 of the Decree 83/2015, as amended by Law 132/2015, pending the sanctioning (omologazione) of the debt restructuring agreement pursuant to Article 182–bis, Paragraph 1 of the Italian Bankruptcy Law or after the filing of the moratorium application pursuant to Article 182–bis, Paragraph 6 of the Italian Bankruptcy Law also in absence of the plan pursuant to Article 161, Paragraph 2, letter (e) of the Italian Bankruptcy Law, the court may also authorize the company to incur in new super senior (so called pre-deducibile) indebtedness, aimed at supporting urgent financial needs related to the company’s business. The company, while filing such request of authorization, is required to specify (i) the purpose of the financing; (ii) that it is unable to otherwise obtain the required funds and (iii) that the absence of such financing will entail an imminent and irreparable prejudice to the company. Court-Supervised Pre-Bankruptcy Composition with Creditors (concordato preventivo) A company which is insolvent or in a situation of crisis (i.e., financial distress which does not yet amount to insolvency) has the option to make a composition proposal to its creditors, under court supervision, to compose its overall indebtedness or reorganize its business, thereby avoiding a declaration of insolvency and the initiation of bankruptcy proceedings. Such composition proposal can be made by a commercial enterprise which exceeds any of the following thresholds: (i) has had assets (attivo patrimoniale) in an aggregate amount exceeding €300,000 for each of the three preceding fiscal years, (ii) gross revenue (ricavi lordi) in an aggregate amount exceeding €200,000 for each of the three preceding fiscal years, and (iii) has total indebtedness in excess of €500,000. Only the company can initially file a petition with the court for a concordato preventivo (together with, inter alia, a restructuring plan and an independent expert report assessing the feasibility of the composition proposal and the truthfulness of the business and accounting data provided by the company). The petition for concordato preventivo is then published by the company in the company’s register. From the date of such publication to the date on which the court sanctions the concordato preventivo, all enforcement and interim relief actions by the creditors (whose debt became due before the sanctioning of the concordato preventivo by the court) are stayed. During this time, all enforcement, precautionary actions and interim measures sought by the creditors, whose title arose beforehand, are stayed. Pre-existing creditors cannot obtain security interests (unless authorized by the court) and mortgages registered within the 90 days preceding the date on which the petition for the concordato preventivo is published in the company’s register are ineffective against such pre-existing creditors. The composition proposal filed in connection with the petition may provide for: (i) the restructuring and payment of debts and the satisfaction of creditors’ claims (provided that, in any case, it shall ensure payment of at least 20% of the unsecured receivables, except for the case of composition with creditors with continuity of the going concern (concordato con continuità aziendale) pursuant to Article 186–bis of the Italian Bankruptcy Law, including through extraordinary transactions, such as the granting to creditors and to their subsidiaries or affiliated companies of shares, bonds (including bonds convertible into shares), or other financial instruments and debt securities); (ii) the transfer to a receiver (assuntore) of the operations of the company making the composition proposal; (iii) the division of creditors into classes; and (iv) different treatment of creditors belonging to different classes. The composition proposal may also contain a proposed tax settlement for the partial or deferred payment of certain taxes. The filing of the petition for the concordato preventivo may be preceded by the filing of a preliminary petition for a concordato preventivo (so called concordato in bianco, pursuant to Article 161, Paragraph 6, of the Italian Bankruptcy Law, as amended by Law Decree No. 69/2013 as converted into Law No. 98/2013 (“Law Decree 69/2013”)). The company may file such petition along with: (i) its financial statements from the latest three financial years; and (ii) the list of creditors with the reference to the amount of their respective receivables, reserving the right to submit the underlying plan, the proposal and all relevant documentation within a period assigned by the court between 60 and 120 days from the date of the filing of the preliminary petition, subject to only one possible further extension of up to 60 days, where there are reasonable grounds for such extension. In advance of such deadline, the company may also file a petition for the approval of a debt restructuring agreement (pursuant to Article 182–bis of the Italian Bankruptcy Law). If the court accepts such preliminary petition, it may: (i) appoint a judicial commissioner (commissario giudiziale) to overview the company, who, in the event that the company has carried out one of the activities under Article 173 of the
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Italian Bankruptcy Law (e.g., concealment of part of assets, omission to report one or more claims, declaration of non-existent liabilities or commission of other fraudulent acts), shall report it to the court, which, upon further verification, may reject the petition at court for a concordato preventivo; and (ii) set forth reporting and information duties of the company during the above-mentioned period. The company may not file such pre-application where it had already done so in the previous two years without the admission to the concordato preventivo having followed. The decree setting the term for the presentation of the documentation also contains the periodic information requirements (also relating to the financial management of the company and to the activities carried out for the purposes of the filing of the application and the restructuring plan) that the company has to fulfil, at least on a monthly basis, until the lapse of the term established by the court. The company shall file, on a monthly basis, the company’s financial position, which is published, the following day, in the company’s register. Non-compliance with these requirements results in the application for the composition with creditors being declared inadmissible and, upon request of the creditors or the public prosecutor and provided that the relevant requirements are verified, in the adjudication of the company into bankruptcy. If the activities carried out by the company appear to be clearly inappropriate to the preparation of the application and the restructuring plan, the court may, ex officio, after hearing the company and—if appointed—the judicial commissioner, reduce the time for the filing of additional documents. Following the filing of the preliminary petition and until the decree of admission to the composition with creditors, the company may: (i) carry out acts pertaining to its ordinary activities; and (ii) seek the court’s authorization to carry out acts pertaining to its non-recurring activities, to the extent they are urgent. Claims arising from acts lawfully carried out by the company and new super senior indebtedness authorized by the court, pending the sanctioning (omologazione) of the debt restructuring agreement pursuant to Article 182– bis, Paragraph 1 of the Italian Bankruptcy Law or after the filing of the moratorium application pursuant to Article 182–bis, Paragraph 6 of the Italian Bankruptcy Law also in absence of the plan pursuant to Article 161, Paragraph 2, letter (e) of the Italian Bankruptcy Law, aimed at supporting urgent financial needs related to the company’s business as recently introduced by Article 1 of the Decree 83/2015, as amended by Law 132/2015, are treated as super-senior (so called pre-deducibili) pursuant to Article 111 of the Italian Bankruptcy Law and the related acts, payments and security interests granted are exempted from the claw-back action provided under Article 67 of the Italian Bankruptcy Law. Law No. 9/2014 specified that the super-seniority of the claims—which arise out of loans granted with a view to allowing the filing of the preliminary petition for the composition with creditors (domanda di pre-concordato)—is granted, pursuant to Article 111 of the Italian Bankruptcy Law, conditional upon the proposal, the plan and all other required documents being filed within the term set by the court and the company being admitted to the concordato preventivo within the same proceeding opened with the filing of the preliminary petition. The composition proposal may propose that: (i) the company’s business continues to be run by the company as a going concern; or (ii) the business is transferred to one or more companies and any assets which are no longer necessary to run the business are liquidated (concordato con continuità aziendale). In these cases, the petition for the concordato preventivo should fully describe the costs and revenue that are expected as a consequence of the continuation of the business as a going concern, as well as the financial resources and support which will be necessary. The report of the independent expert shall also certify that the continuation of the business is conducive to the satisfaction of creditors’ claims to a greater extent than if such composition proposal was not implemented. Furthermore, the going concern-based arrangements with creditors can provide for, inter alia, the winding-up of those assets that are not functional to the business allowed. The composition agreement may also contain a proposed tax settlement for the partial or deferred payment of certain taxes. If the court determines that the composition proposal is admissible, it appoints a judge (giudice delegato) to supervise the procedure, appoints one or more judicial officers (commissari giudiziali) and calls a creditors’ meeting. During the implementation of the proposal, the company generally continues to be managed by its board of directors, but is supervised by the appointed judicial officers and judge (who shall authorize all transactions that exceed the ordinary course of business). The concordato preventivo is voted on at a creditors’ meeting and must be approved with the favorable vote of (a) the creditors representing the majority of the receivables entitled to vote and, in the event that the plan provides for more classes of creditors, and (b) the majority of the classes. The concordato preventivo is
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approved only if the required majorities of creditors expressly voted in favor of the proposal. Law 132/2015 abrogated the implied consent rule under which those creditors who, being entitled to vote, did not do so and those who did not express their dissent within 20 days of the closure of the minutes of the creditors’ meeting are deemed as consenting to the composition with creditors. Under the current regime, creditors who did not exercise their voting rights in the creditors’ meeting can do so (even via email) within 20 days of the closure of the minutes of the creditors’ meeting and, after such term, creditors who have did not exercise their voting right will be deemed not to approve the concordato preventivo proposal. Secured creditors are not entitled to vote on the proposal of concordato preventivo unless and to the extent they waive their security, or the concordato preventivo provides that they will not receive full satisfaction of the fair market value of their secured assets (such value being assessed by an independent expert), in which case they can vote only in respect of the part of their debt affected by the proposal. The court may also approve the concordato preventivo (notwithstanding the circumstance that one or more classes objected to it) if: (i) the majority of classes has approved it; and (ii) the court deems that the interests of the dissenting creditors would be adequately safeguarded through it compared to other solutions. If an objection to the implementation of the concordato preventivo is filed by 20% of the creditors or, in case there are different classes of creditors, by a creditor belonging to a dissenting class, entitled to vote, the court may nevertheless sanction the concordato preventivo if it deems that the relevant creditors’ claims are likely to be satisfied to a greater extent as a result of the concordato preventivo than would otherwise be the case. The Decree 83/2015, as amended by Law 132/2015, introduced the possibility for creditors (except for individuals or entities controlled, controlling or under common control of the company) holding at least ten percent (10%) of the aggregate claims against a company to present an alternative plan to the company’s plan in a pre-bankruptcy agreement proceedings (concordato preventivo) subject to certain conditions being met, including, in particular, that the proposal of the company do not ensure recovery of at least (i) 40% of the unsecured claims (crediti chirografari) in case of pre-bankruptcy agreement proposal with liquidation purpose (concordato liquidatorio), or (ii) 30% of the unsecured claims (crediti chirografari) in case of pre-bankruptcy agreement proposals based on the continuation of the going concern (concordato con continuità aziendale). In addition, to strengthen the position of unsecured creditors, Law 132/2015 sets forth that a pre-bankruptcy agreement proposal with liquidation purpose (concordato liquidatorio) (i.e., a pre-bankruptcy agreement proposal aiming at transferring all the assets to the creditors and having such assets sold in their interest by the judicial commissioner) must ensure that the unsecured creditors are paid at least 20% of their claims. This provision does not apply to pre-bankruptcy agreement proposals based on the continuation of the going concern (concordato con continuità aziendale). To the extent the alternative plan is approved by the creditors and ratified (omologato), the court may grant special powers to the judicial commissioner to implement the plan if the company does not cooperate, including by taking all corporate actions required. In addition, Article 163–bis of the Italian Bankruptcy Law, introduced by the Decree 83/2015, as amended by Law 132/2015, provides that, if a concordato preventivo includes an offer for the sale of the company’s assets or of a going concern of the company to an identified third party, the judicial commissioner may request to the court the opening a competitive bidding process to the extent that it would be in the best interest of the creditors. After the approval by the creditors’ meeting, the court (having settled possible objections raised by the dissenting creditors, if any) confirms the concordato preventivo proposal by issuing a confirmation order. If the creditors’ meeting does not approve the concordato preventivo, the court may, upon request of the public prosecutor or a creditor, and having decided that the appropriate conditions apply, declare the company bankrupt. Bankruptcy (fallimento) A request to declare a company bankrupt and to commence bankruptcy proceedings (fallimento) and the judicial liquidation of the company’s assets can be filed by the company itself, any of its creditors and, in certain cases, by the public prosecutor. Insolvency, as defined under the Italian Bankruptcy Law, occurs when a company is no longer able to regularly meet its obligations with ordinary means as they come due. The bankruptcy is declared by the competent bankruptcy court. The Italian Bankruptcy Law is applicable only to commercial enterprises (imprenditori commerciali) if any of the following thresholds are met: the company (i) has had assets (attivo patrimoniale) in an aggregate amount exceeding €300,000 for each of the three
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preceding fiscal years; (ii) has had gross revenue (ricavi lordi) in an aggregate amount exceeding €200,000 for each of the three preceding fiscal years; and (iii) has total indebtedness in excess of €500,000. Upon the commencement of bankruptcy proceedings, among other things:
subject to certain exceptions, all actions of creditors are stayed and creditors must file claims within a defined period. In particular, under certain circumstances, secured creditors may enforce against the secured property as soon as their claims are admitted as preferred claims. Secured claims are paid out of the proceeds of the secured assets, together with interest and expenses. Any outstanding balance will be considered unsecured and rank pari passu with all of the company’s other unsecured debt. The secured creditor may sell the secured asset only after it has obtained authorization from the designated judge (giudice delegato). After hearing the bankruptcy receiver and the creditors’ committee, the designated judge decides whether to authorize the sale, and sets forth the timing in its decision;
the administration of the company and the management of its assets pass from the company to the bankruptcy receiver (curatore fallimentare);
any act of the company done after a declaration of bankruptcy (including payments made) is ineffective against the creditors;
continuation of business may be authorized by the court if an interruption would cause greater damage to the company, but only if the continuation of the company’s business does not cause damage to creditors; and
the execution of certain contracts or transactions pending as of the date of the bankruptcy declaration are suspended until the bankruptcy receiver decides whether to take them over. Although the general rule is that the bankruptcy receiver is allowed to either continue or terminate contracts where some or all of the obligations have not been performed by both parties, certain contracts are subject to specific rules expressly provided for by the Italian Bankruptcy Law. The bankruptcy proceedings are carried out and supervised by a court-appointed bankruptcy receiver, a deputy judge (giudice delegato) and a creditors’ committee. The bankruptcy receiver is not a representative of any one of the creditors, but is responsible for the liquidation of the assets of the company for the satisfaction of the creditors as a whole. The proceeds from the liquidation are distributed in accordance with statutory priority rights. The liquidation of a company can take a considerable amount of time, particularly in cases where the company’s assets include real estate. In this respect, Law 132/2015 amended the relevant provision of the Italian Bankruptcy Law which sets forth the requirements applicable to the liquidation procedure and as a consequence the period for the liquidation of a company is shortened. The Italian Bankruptcy Law provides for a priority of payment to certain preferential creditors, including administrative costs associated with the bankruptcy proceeding and costs related to the bankruptcy receiver’s running of the company, Italian tax and national social security contributions and employee arrears of wages or salary. Such priority of payment is provided under mandatory provisions of Italian law (and, as a consequence, it is untested and it is unlikely that priority of payments such as those commonly provided in intercreditor agreements would be recognized by an Italian bankruptcy estate to the extent they are inconsistent with the priorities provided by applicable law). Bankruptcy Composition with Creditors (concordato fallimentare) A bankruptcy proceeding can terminate prior to liquidation through a bankruptcy composition proposal with creditors. The relevant proposal can be filed, by one or more creditors or third parties, from the declaration of bankruptcy. By contrast, the company or its subsidiaries are only permitted to file such proposal after one year following such declaration, but within two years following the decree giving effectiveness to the liabilities account (stato passivo). Secured creditors are not entitled to vote on the proposal of concordato fallimentare, unless and to the extent they waive their security or the concordato fallimentare provides that they will not receive full satisfaction of the fair market value of their secured assets (such value being assessed by an independent expert), in which case they can vote only in respect of the part of their debt affected by the proposal.
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The proposal may provide for the division of creditors into classes (thereby proposing different treatment among the classes), the restructuring of debts and the satisfaction of creditors’ claims in any manner. The concordato fallimentare proposal must be approved by the creditors’ committee and the creditors holding the majority (by value) of claims (and, if classes are formed, also by a majority (by value) of the claims in a majority of the classes). Final court ratification is also required. Statutory Priorities The statutory priority given to creditors under the Italian Bankruptcy Law may be different from that established under the laws of the United States, the United Kingdom and certain other EU jurisdictions. Neither the company nor the court can deviate from the rules of statutory priority by proposing their own priorities of claims or by subordinating one claim to another based on equitable subordination principles (as a consequence it must be noted that priority of payments such as those commonly provided in intercreditor agreements may not be enforceable against an Italian bankruptcy estate to the extent they are inconsistent with the priorities provided by law). The rules of statutory priority apply irrespective of whether the proceeds are derived from the sale of the entire company’s estate or part thereof, or from a single asset. Article 111 of the Italian Bankruptcy Law establishes that proceeds of liquidation shall be allocated according to the following order: (i) for payments of “pre-deductible” claims (i.e., claims originated in the insolvency proceeding, such as costs related to the procedure); (ii) for payment of claims which are privileged, such as claims of secured creditors; and (iii) for the payment of unsecured creditors’ claims. Under Italian law, the highest priority claims (after the costs of the proceedings are paid) are the claims of preferential creditors including, inter alia, a claim whose priority is legally acquired (i.e., repayment of rescue or interim financing, mentioned above), the claims of the Italian tax authorities and social security administrators, and claims for employee wages. The remaining priority claims are those of “privileged” creditors (creditori privilegiati; a priority in payment in most circumstances, but not exclusively, provided for by law), mortgagees (creditori ipotecari), pledgees (creditori prignoratizi) and unsecured creditors (crediti chirografari). Avoidance Powers in Insolvency Under Italian law, there are “clawback” or avoidance provisions that may lead to, inter alia, the revocation of payments made or security interests granted by the company prior to the declaration of bankruptcy. The key avoidance provisions include, but are not limited to, transactions made below market value, preferential transactions and transactions made with a view to defrauding creditors. Clawback rules under Italian law are normally considered to be particularly favorable to the bankruptcy receiver, compared to the rules applicable in other jurisdictions. In bankruptcy proceedings, depending on the circumstances, the Italian Bankruptcy Law provides for a clawback period of up to either one year or six months in certain circumstances (please note that in the context of extraordinary administration procedures—see below—in relation to certain transactions, the clawback period can be extended to five and three years, respectively) and a two-year ineffectiveness period for certain other transactions. The Italian Bankruptcy Law distinguishes between acts or transactions that are ineffective by operation of law and acts or transactions that are voidable at the request of the bankruptcy receiver or court commissioner, as detailed below. (i) Acts ineffective by operation of law (a) Under Article 64 of the Italian Bankruptcy Law, subject to certain limited exceptions, all transactions entered into for no consideration are ineffective vis-à-vis creditors if entered into by the company in the two-year period prior to the insolvency declaration. Any asset subject to a transaction which is ineffective pursuant to Article 64 of the Italian Bankruptcy Law becomes part of the bankruptcy estate by operation of law upon registration (trascrizione) of the declaration of bankruptcy, without needing to wait until the ineffectiveness of the transaction is sanctioned by a court. Any interested person may challenge the registration before the delegated judge as a violation of law; and
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(b) under Article 65 of the Italian Bankruptcy Law, payments of debts falling due on the day of the declaration of insolvency or thereafter are deemed ineffective vis-à-vis creditors if made by the company in the two-year period prior to the insolvency declaration. (ii) Acts that could be declared ineffective at the request of the bankruptcy receiver/court commissioner (a) The following acts and transactions, if done or made during the period specified below, may be clawed back (revocati) vis-à-vis the bankruptcy as provided for by Article 67 of the Italian Bankruptcy Law and be declared ineffective unless the other party proves that it had no actual or constructive knowledge of the company’s insolvency at the time the transaction was entered into: (I) the onerous transactions entered into in the year preceding the insolvency declaration, where the value of the debt or of the obligations undertaken by the company exceeds by 25% the value of the consideration received by or promised to the company; (II) payments of debts, due and payable, made by the company, which were not paid in cash or by other customary means of payment in the year preceding the insolvency declaration; (III) pledges and mortgages granted by the company in the year preceding the insolvency declaration to secure pre-existing debts which have not yet fallen due; and (IV) pledges and mortgages granted by the company in the six months preceding the insolvency declaration, to secure debts which had fallen due. (b) The following acts and transactions, if done or made during the period specified below, may be clawed back (revocati) and declared ineffective if the bankruptcy receiver proves that the other party knew that the company was insolvent at the time of the act or transaction: (I) the payments of debts that are immediately due and payable and any onerous transactions entered into or made in the six months preceding the insolvency declaration; and (II) the granting of security interests securing debts (even those of third parties) and made in the six months preceding the insolvency declaration. (c) The following transactions are exempt from clawback actions: (I) a payment for goods or services made in the ordinary course of business and in accordance with market practice; (II) a remittance on a bank account, provided that it does not reduce the company’s debt towards the bank in a material and lasting manner; (III) a sale, including an agreement for sale registered pursuant to Article 2645–bis of the Italian Civil Code, currently in force, made for a fair value and concerning a residential property that is intended as the main residence of the purchaser or the purchaser’s family (within three degrees of kinship) or a non-residential property that is intended as the main seat of the enterprise of the purchaser, on the condition that, as of the date of the insolvency declaration, such activity is actually exercised or the investments for the start of such activity have been carried out; (IV) transactions entered into, payments made and security interests granted with respect to the company’s goods, provided that they concern the implementation of a piano di risanamento attestato (see “—Out-Of-Court Reorganization Plans (piani di risanamento) pursuant to Article 67, Paragraph 3(d) of the Italian Bankruptcy Law” above); (V) a transaction entered into, payment made or security interest granted to implement a concordato preventivo (see “—Court-Supervised Pre-Bankruptcy Composition with
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Creditors (concordato preventivo)” above) or an accordo di ristrutturazione dei debiti under Article 182–bis of the Italian Bankruptcy Law (see “—Debt Restructuring Agreements with Creditors (accordi di ristrutturazione dei debiti) Pursuant to Article 182–bis of the Italian Bankruptcy Law” above) and transactions entered into, payments made and security interests granted after the filing of the application for a concordato preventivo (see above); (VI) remuneration payments to the company’s employees and consultants; and (VII) a payment of a debt that is immediately due, payable and made on the due date, with respect to services necessary for access to concordato preventivo procedures. In addition, in certain cases, the bankruptcy receiver can request that certain transactions of the company be declared without effect vis-à-vis the acting creditors within the Italian Civil Code ordinary clawback period of five years (revocatoria ordinaria). Under Article 2901 of the Italian Civil Code, a creditor may demand that transactions through which the company disposed of its assets to the detriment of such creditor’s rights be declared ineffective with respect to such creditor, provided that the company was aware of such detriment (or, if the transaction was entered into prior to the date on which the creditor’s claim originated, that such transaction was fraudulently entered into by the company to cause detriment of such creditor’s rights) and that, in the case of a transaction entered into for consideration with a third person, the third person was aware of such detriment (or, if the transaction was entered into prior to the date on which the creditor’s claim originated, such third party participated in the fraudulent scheme). The burden of proof is entirely with the bankruptcy receiver. Law 132/2015 also introduced new Article 2929–bis to the Italian Civil Code, providing for a “simplified” claw-back action for the creditor with respect to certain types of transactions put in place by the company with the aim to subtract (registered) assets from the attachment by its creditors. In particular, the creditor can now start enforcement proceedings over the relevant assets without previously obtaining a court decision clawing back or nullifying the relevant (fraudulent) transaction, to the extent that such transaction had been carried out without consideration (e.g., gratuitous transfers, or creation of shield instruments such as trusts or the so called fondo patrimoniale—“family trust”). In the case of gratuitous transfers, the enforcement action can also be carried out by the creditor against the third party purchaser. Extraordinary Administration for Large Insolvent Companies (amministrazione straordinaria delle grandi imprese in stato di insolvenza) An extraordinary administration procedure applies under Italian law for large industrial and commercial enterprises (the Prodi–bis procedure). The company must be insolvent, but demonstrating serious recovery prospects. To qualify for this procedure, the company must have employed at least 200 employees in the previous year. In addition, it must have debts equal to at least two-thirds of its assets as shown in its financial statements and two-thirds of its income from sales and services during its last financial year. Any of the creditors, the company, a court or the public prosecutor may make a petition to commence an extraordinary administration procedure. The same rules set forth for bankruptcy proceedings with respect to existing contracts and creditors’ claims largely apply to extraordinary administration proceedings. There are two main phases: a “judicial phase” and an “administrative phase”. Judicial Phase In the judicial phase, the court determines whether the company meets the admission criteria and whether it is insolvent. It then issues a decision to that effect and appoints up to three judicial receivers (commissiario giudiziale) to investigate whether the company has serious prospects for recovery via a business sale or reorganization. The judicial receiver files a report with the court within 30 days, and within ten days from such filing, the Italian Productive Activities Ministry (the “Ministry”) may make an opinion on the admission of the company to the extraordinary administration procedure. The court then decides (within 30 days from the filing of the report) whether to admit the company to the procedure or to place it into bankruptcy.
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Administrative Phase Assuming that the company is admitted to the extraordinary administration procedure, the administrative phase begins and an extraordinary commissioner (or commissioners) is appointed by the Ministry. The extraordinary commissioner(s) prepare(s) a plan which can provide for either the sale of the business as a going concern within one year (unless extended by the Ministry) (the “Disposal Plan”) or a reorganization leading to the company’s economic and financial recovery within two years (unless extended by the Ministry) (the “Recovery Plan”). The plan may also include an arrangement with creditors (e.g., a debt for equity swap, an issue of shares in a new company to whom the assets of the company have been transferred, etc.) (concordato). The plan must be approved by the Ministry within 30 days from submission by the extraordinary commissioner. In addition, the extraordinary commissioner draws up a report every six months on the financial condition and interim management of the company and sends it to the Ministry. The procedure ends upon successful completion of either a Disposal Plan or a Recovery Plan, failing which the company is declared bankrupt. Industrial Restructuring of Large Insolvent Companies (ristrutturazione industriale di grandi imprese in stato di insolvenza) Introduced in 2003, the industrial restructuring of large insolvent companies is also known as the Marzano procedure. It is complementary to the Prodi–bis procedure and, except as otherwise provided, the same provisions apply. The Marzano procedure is intended to be faster than the Prodi–bis procedure. For example, although a company must be insolvent, the application to the Ministry is made together with the filing to the court for the declaration of the insolvency of the company. The Marzano procedure only applies to large insolvent companies that, on a consolidated basis, have at least 500 employees in the year before the procedure is commenced and at least €300,000,000 of debt. The decision of whether to open a Marzano procedure is taken by the Ministry following the company’s request (who must also file an application for the declaration of insolvency). The Ministry assesses whether the relevant requirements are met and then appoints the extraordinary commissioner(s) who will manage the company. The court also decides on the company’s insolvency. The extraordinary commissioner(s) has/have 180 days (or 270 days if the Ministry so agrees) to submit a Disposal Plan or a Recovery Plan. The restructuring through the Disposal Plan or the Recovery Plan must be completed within, respectively, one year (extendable to two years) and two years. If no Disposal Plan or Recovery Plan is approved by the Ministry, the court will declare the company bankrupt and open bankruptcy proceedings. Compulsory Administrative Winding-Up (liquidazione coatta amministrativa) A compulsory administrative winding-up (liquidazione coatta amministrativa) is only available for certain companies, including, inter alia, public interest entities such as state-controlled companies, insurance companies, credit institutions and other financial institutions, none of which can be made subject to bankruptcy proceedings. It is irrelevant whether these companies belong to the public or the private sector. A compulsory administrative winding-up is a special sort of insolvency proceeding in which the company is liquidated not by the bankruptcy court, but by the relevant administrative authority that oversees the industry in which the company is active. The procedure may be triggered not only by the insolvency of the company, but also on other grounds expressly provided for by the relevant legal provisions (e.g., in respect of Italian banks, serious irregularities concerning the management of the bank or serious violations of the applicable legal, administrative or statutory provisions). The effect of this procedure is that the company loses control over its assets and a liquidator (commissario liquidatore) is appointed to wind up the company. The liquidator’s actions are monitored by a steering committee (comitato di sorveglianza). The powers assigned to the designated judge and the bankruptcy court under the other insolvency proceedings are assumed by the relevant administrative authority under this procedure. The effect on creditors of the forced administrative winding-up is largely the same as under bankruptcy proceedings and includes, for example, a ban on enforcement measures. The same rules set forth for bankruptcy proceedings with respect to existing contracts and creditors’ claims largely apply to extraordinary administration proceedings.
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Interim financing The Decree 83/2015, as amended by Law 132/2015, introduced the possibility for companies to also obtain authorization to receive urgent interim financing and to continue to use existing trade receivables credit lines (linee di credito autoliquidanti) necessary for their business needs before a court’s approval of a Pre-Bankruptcy Composition with Creditors (concordato preventivo) or the entry into a debt restructuring agreement (accordo di ristrutturazione dei debiti) with priority status (prededucibilità) in case of a subsequent bankruptcy without the expert certification and through an accelerated review process by the relevant court, upon, inter alia, the company’s declaration that interim finance is urgently needed and the company’s inability to access such finance would cause imminent and irreparable damage. The court must decide on the request within ten days of the filing of the application after consultation with the judicial commissioner and, if deemed necessary, the principal creditors. Before the entry into force of the Decree 83/2015, companies could be granted financing with priority status (prededucibilità) before a court’s approval of a Pre-Bankruptcy Composition with Creditors (concordato preventivo) or the entry into a debt restructuring agreement (accordo di ristrutturazione dei debiti) if: (i) an expert certified that such financing is necessary to the overall restructuring process; or (ii) such financing is provided for by the plan or the agreement, provided in each case that the court approved such priority status. Certain Italian Law Considerations in Relation to Guarantees and Security Interests Maximum Guaranteed Amount Under Article 1938 of the Italian Civil Code, if a personal guarantee is issued to guarantee conditional or future obligations, the guarantee must be limited to a maximum amount. Such maximum amount should be expressly identified at the outset and expressed in figures (either in the guarantee deed or by reference to a separate document). In addition, as mentioned above, the guarantees granted by the Italian Guarantor must be supported by corporate benefit; in other words, the maximum guaranteed amount must be indicated in the guarantee and shall not exceed the financial capabilities of the Italian Guarantor. It has been held that such determination must be proportionate to the Italian Guarantor’s assets. If such determination is deemed disproportional to the assets of the Italian Guarantor, there is the risk that the guarantee could be declared void, however it is uncertain whether courts are entitled to debate and rule over such determinations. Upon certain conditions, the granting of guarantees may be considered as a restricted financial activity within the meaning of Article 106 of Italian Legislative Decree No. 385 of September 1, 1993 (the “Italian Banking Act”), whose exercise is exclusively demanded to banks and authorized financial intermediaries. Non-compliance with the provisions of the Italian Banking Act may, inter alia, entail the relevant guarantees being considered null and void. In this respect, Italian Legislative Decree No. 53 of April 2, 2015, implementing Article 106, paragraph 3, of the Italian Banking Act, states that the granting of guarantees or security by a company for the obligations of another company which is part of the same group does not qualify as a restricted financial activity, whereby “group” includes controlling and controlled companies within the meaning of Article 2359 of the Italian Civil Code as well as companies, which are under the control of the same entity. As a result of the above described rules, subject to the Italian Guarantor and the guaranteed entity being part of the same group of companies, the provision of the guarantees would not amount to a restricted financial activity. Corporate Benefit and Financial Assistance Issues under Italian Law Under Italian law, the entry into of a transaction (including the creation of a security interest or the granting of a guarantee) by an Italian company must be permitted by the applicable laws and by its by-laws (statuto sociale) and is subject to compliance with the rules on corporate benefit, corporate authorization and certain other mandatory provisions. If a security interest or a guarantee is being provided in the context of an acquisition, group reorganization, refinancing or restructuring, financial assistance issues may also be triggered. Corporate Benefit An Italian company entering into a transaction (including granting a security interest or a guarantee) must receive a real and adequate benefit in exchange for it. The concept of a real and adequate benefit is not specifically defined in the applicable legislation and is determined by a factual analysis on a case-by-case
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basis. As a general rule, corporate benefit is to be assessed at the level of the Italian company on a stand- alone basis, although upon certain circumstances and subject to specific rules the interest of the group to which such Italian company belongs may also be taken into consideration. As a general rule, absence of a real and adequate corporate benefit could render the transaction (including granting a security interest or a guarantee) ultra vires and potentially affected by conflict of interest and the related corporate resolutions adopted by the shareholders and directors may be the subject matter of challenges and annulment. Civil liabilities also may be imposed on the directors of the Italian company if it is assessed that they did not act in the interest of it and that the acts they carried out do not fall within the corporate purpose of the Italian company or were against mandatory provisions of Italian law. Furthermore, criminal sanctions may apply to the directors of the company under Article 2634 of the Italian Civil Code if a violation of Paragraph 5 of Article 2358 of the Italian Civil Code on financial assistance is found to have occurred. The lack of corporate benefit could also lead to civil liabilities on those companies or persons ultimately exercising control over the Italian company or having knowingly received an advantage or profit from such improper control. Moreover, the transaction (including the guarantees or security interest granted by the Italian company) could be declared null and void if the lack of corporate benefit was known or presumed to be known by the third party and such third party acted intentionally against the interest of the Italian company. The above principles on corporate benefit apply equally to upstream/cross-stream/downstream guarantees and security interests granted by Italian companies. In relation to security interests or guarantees, while corporate benefit for a downstream security or guarantee (i.e., a security or a guarantee granted to secure financial obligations of direct or indirect subsidiaries of the relevant grantor) can usually be easily proved, the validity and effectiveness of an upstream or cross-stream guarantee or security interest (i.e., a security interest or a guarantee granted to secure financial obligations of the direct or indirect parent or sister companies of the relevant grantor) granted by the Italian company depend on the existence of a real and adequate benefit in exchange for the guarantees or security interest and may be challenged unless it can be proved that the Italian company may derive some benefits or advantages from the granting of such guarantees or security interest. The general rule is that the risk assumed by the Italian company granting a guarantee or security interest must not be disproportionate to the direct or indirect economic benefit to it. In particular, in case of upstream guarantees and cross-stream security interests or guarantees for the financial obligations of group companies, examples may include financial consideration in the form of access to cash flows through intercompany loans from other members of that group. The concept of real and adequate benefit is not defined in the applicable legislation and is assessed and determined on a case-by-case basis, further its existence is purely a factual analysis made by the Italian company’s directors. As a general rule, corporate benefit is to be assessed at the level of the Italian company on a stand-alone basis, although in certain circumstances, and subject to specific strict rules, the interest of the group to which such company belongs may also be taken into consideration. In particular, in case of up-stream and cross-stream guarantee or security for the financial obligations of group companies, examples may include financial consideration in the form of access to cash flows through intercompany loans from other members of the group, while transactions featuring debt financings of distributions to shareholders are largely untested in Italian courts, and, therefore, limited guidance is provided as to whether and to what extent such transactions could be challenged for lack of corporate benefit and conflict of interest. Generally, the risk assumed by a Guarantor or grantor of security must not be disproportionate to the direct or indirect economic benefit to it. To comply with the above corporate law requirements, the maximum amount that the Italian Guarantor may be required to pay in respect of its obligations as Guarantor under the Indenture will be subject to additional limitations. In particular, such amount will never exceed the aggregate of (i) the outstanding principal amount drawn by the Italian Guarantor (or any of its subsidiaries) as borrower under the Revolving Credit Facilities including any refinancing thereof and (ii) the outstanding principal amount of certain intercompany loans or notes received by the Italian Guarantor (or any of its subsidiaries) in the context of the contemplated reorganization of the group or thereafter advanced to it or its subsidiaries.
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Financial Assistance In addition, the granting of a guarantee or a security by an Italian company cannot include any liability which would result in unlawful financial assistance within the meaning of Article 2358 or 2474, as the case may be, of the Italian Civil Code pursuant to which, save for specific exceptions, it is unlawful under Italian laws for an Italian company to give financial assistance (whether by means of loans, security, guarantees or otherwise) to support the acquisition or subscription by a third party of its own shares or quotas or those of any entity that (directly or indirectly) controls the Italian company, and any loan, guarantee or security given or granted in breach of these provisions is null and void. Financial assistance to refinance indebtedness incurred for the acquisition, purchase or subscribe for its own shares or quotes or those of its direct or indirect parent company might also be considered as falling within the scope of Italian financial assistance provisions. Certain Limitations of Enforcement Under Italian law, in the event that an Italian company becomes subject to insolvency proceedings, guarantees and security interests given by it or by way of a parallel debt obligation could be subject to potential challenges by the appointed bankruptcy receiver or by other creditors under the rules of ineffectiveness or avoidance or clawback of Italian Bankruptcy Law and the relevant law on the non-insolvency avoidance or clawback of transactions made by the Italian company during a certain legally specified period (the “suspect period”). For a more detailed explanation of the terms, conditions and consequences of clawback actions in an insolvency scenario, see “—Certain Italian Insolvency Laws” above. If challenged successfully, the guarantee or the security interest may become unenforceable and any amounts received must be refunded to the insolvent estate. To the extent that the grant of any guarantees or security interest is voided, holders of Notes could lose the benefit of the guarantee or security interest and may not be able to recover any amounts under the related guarantee or security documents. According to Italian law, the enforcement of any claims, obligations, security interest and rights in general may be subject to, inter alia, the following:
the enforcement of obligations may be limited by the insolvency proceedings listed above relating to or affecting the rights of creditors;
an Italian court will not necessarily grant any specific enforcement or precautionary measures, the availability of which is subject to the discretion of the court;
with respect to contracts providing for mutual obligations (contratti a prestazioni corrispettive), each party can refuse to perform its obligation if the other party does not perform or does not offer to perform its own obligation thereunder, in accordance with and subject to the provisions of Article 1460 of the Italian Civil Code;
claims arising under Italian law governed documents may become barred under the provision of Italian law concerning prescriptions and limitations by the lapse of time (prescrizioni and decadenze) or may be or become subject to a claim of set-off (compensazione) or to counterclaim;
pursuant to Article 1241 of the Italian Civil Code concerning set-off of reciprocal obligations (compensazione), persons who have reciprocal debt obligations may set-off such obligations for the correspondent amount when both such debt obligations have as an object a pecuniary obligation or fungible assets and are equally liquid and payable;
where any party to any agreement or instrument is vested with discretion or may determine a matter in its opinion, Italian law may require that such discretion is exercised reasonably or that such opinion is based on reasonable grounds;
the enforceability in Italy of obligations or contractual provisions governed by a foreign law may be limited by the fact that the relevant provisions of laws may be deemed contrary to Italian public policy principles;
there is some possibility that an Italian court could hold that a judgment on a particular agreement or instrument, whether given in an Italian court or elsewhere, would supersede such agreement or
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instrument to all intents and purposes, so that any obligation thereunder which by its terms would survive such judgment might not be held to do so;
enforcement of obligations may be invalidated by reason of fraud or abuse of the law (abuso del diritto);
the enforceability of an obligation pursuant to the terms set forth in any agreement or instrument may be subject to the interpretation of an Italian court which may carry out such interpretation pursuant to the provisions of Articles 1362 and following of the Italian Civil Code;
any question as to whether or not any provision of any agreement or instrument which is illegal, invalid, not binding, unenforceable or void may be severed from the other provisions thereof to save those other provisions would be determined by an Italian court on the basis of the interpretation of intention of the parties, taking also into account the conduct of the parties following the execution of such agreement or instrument (Article 1419 of the Italian Civil Code);
an Italian company, either directly or indirectly, cannot grant loans or provide security interest for the purchase or subscription of its own shares unless the strict requirements provided for the Italian Civil Code are satisfied;
an Italian company must have a specific corporate interest in guaranteeing or securing financial obligations of its parent company or any other companies, whether related or unrelated, such interest being determined by the relevant company on a case-by-case basis;
in case of bankruptcy, a receiver in bankruptcy is appointed by the court to administer the proceeding under the supervision of the bankruptcy court and creditors cannot start or continue individual foreclosure actions (including the enforcement of security interests) against the Italian company (automatic stay). Furthermore, the sale of the relevant pledged assets is carried out by such receiver unless the pledgee is expressly authorized by the bankruptcy court;
the effectiveness of terms exculpating a party from liability or duties otherwise owed is prevented by Italian law in the event of gross negligence (colpa grave), willful misconduct (dolo) or the violation of mandatory provisions;
penalties and liquidated damages (penali) may be equitably reduced by a court;
Italian courts do not necessarily give full effect to an indemnity for the costs of enforcement or litigation;
the preemption rights (prelazione) granted by a pledge extend to interest accrued in the year in which the date of the relevant seizure/attachment or adjudication in bankruptcy falls (or, in the absence of seizure/attachment, at the date of the notification of the payment demand (precetto) and extend, moreover, to interest accrued and to accrue thereafter, but only to the extent of legal interest and until the date of the forced sale occurred in the context of the relevant foreclosure proceeding/bankruptcy proceedings;
in order to oppose an assignment to any third party, it will be necessary to notify such assignment to the relevant company or make such company to accept it by an instrument bearing an undisputable date (data certa); the priority of such assignment will be determined accordingly. One way of ensuring that a document has an indisputable date is that of ensuring that the execution of the relevant document by one of the parties to it is witnessed by a notary who states the date of witnessing on the document, another way is to have each page of the document stamped by the post office;
a security interest does not prevent creditors of the Italian company other than the pledge from continuing enforcement or enforcement proceedings on the assets secured by the relevant pledge; and
in case of bankruptcy of the grantor of the pledge over quotas or shares, the assets secured by the pledge could be freely sold to any third party in the context of the relevant bankruptcy proceeding and, as a consequence, the proceeds would be set aside for the prior satisfaction of the pledgee but the
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pledge would be terminated and, therefore, the latter would lose entitlement to the voting rights on the pledged quotas/shares. In addition, under Italian law, in certain circumstances also in the ordinary course of business, an action can be brought by any creditor of the Italian company within five years from the date in which the latter enters into a guarantee, security, agreement and any other act by which it disposes of any of its assets, to seek a clawback action (azione revocatoria ordinaria) pursuant to Article 2901 of the Italian Civil Code (which results in a declaration of ineffectiveness as to the acting creditor) of the said guarantee, security, agreement and other act that is purported to be prejudicial to the acting creditor’s right of credit. An Italian court could revoke the said guarantee, security, agreement and other act only if it, in addition to the ascertainment of the prejudice, was to make the two following findings:
that the Italian company was aware of the prejudice which the act would cause to the rights of the acting creditor, or, if such act was done prior to the existence of the claim or credit, that the act was fraudulently designed for the purpose of prejudicing the satisfaction of the claim or credit;
that, in the case of non-gratuitous act, the third party involved was aware of said prejudice and, if the act was done prior to the existence of the claim or credit, that the said third party participated in the fraudulent design. Furthermore, under fraudulent conveyance and other provisions of Italian law, a court could void or invalidate all or a portion of the obligations of a guarantor under the relevant guarantee and, if payment had already been made under that guarantee, require the recipients of that payment to return the payment to the relevant guarantor, if the court found that, inter alia: (i) the Italian company gave such guarantee with actual intent to hinder, delay or defraud its current or future creditors or with a desire to prefer some creditors over others, or when the beneficiary of the guarantee was aware that the Italian company was insolvent when it gave the relevant guarantee; (ii) the Italian company did not receive fair consideration or reasonably equivalent value for its guarantee or the relevant guarantor was insolvent at the time the guarantee was given; (iii) the relevant guarantee was held to exceed the corporate objects of the Italian company or not to be in the best interest or for the corporate benefit of the Italian company; or (iv) the Italian company giving such guarantee was aware, or should have been aware, that the transaction was to the detriment of its creditors. If a court decided either that a guarantee was a fraudulent conveyance and voided such guarantee, or held it unenforceable for any other reason, the beneficiary of the guarantee may cease to have any claim with respect to the Italian company. The same would also apply to any security interest. Certain Considerations in Relation to Security Interests Parallel Debt It is uncertain and untested in the Italian courts whether, under Italian law, a security interest can be created and perfected: (i) in favor of creditors (such as the holders of Notes) which are neither directly parties to the relevant security documents or are not specifically identified therein or in the relevant share certificates and corporate documents or public registries; and (ii) in favor of a “trustee,” since there is no established concept of “trust” or “trustee” under Italian law and the precise nature, effect and enforceability of the duties, rights and powers of a “trustee” as agent or trustee under security interests granted over Italian assets is uncertain under Italian law. Given the above and considering that the holders of Notes are not party to the security documents governed by Italian law, there is a risk that an Italian court may determine that the holders of Notes (in relation to which the relevant perfection formalities acknowledging their status as a secured creditor are not perfected at the time of enforcement) are not secured by the security interests created under the security documents governed by Italian law or cannot enforce that security interest.
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To address the above potential issue, the Intercreditor Agreement provides for the creation of a “parallel debt.” Pursuant to the parallel debt claim and subject to the terms of the Intercreditor Agreement and to applicable law, the Security Agent, in its individual capacity acting in its own name and not as agent or representative of the holders of Notes, shall become the holder of a claim equal to each amount payable by an obligor under the Notes. The security interests in the collateral securing the Notes governed by Italian law will then secure the parallel debt. However, holders of Notes should note that the enforceability of security interests governed by Italian law and granted in favor of the creditor of a parallel debt has not been tested before the Italian courts and, therefore, there is no certainty that the parallel debt will eliminate or mitigate the risk of unenforceability by the beneficiaries of the security interests securing the Notes governed by Italian law. Italian corporate law (Articles 2497–quinquies and 2467 of the Italian Civil Code) provides for rules to protect creditors against “undercapitalized companies” and provides for remedies in respect thereof. In this respect, in case of a loan to a company made by (i) a person that, directly or indirectly, directs the company or exercises management and coordination powers over that borrowing company or (ii) any entity subject to the management and coordination powers of the same person or (iii) a quotaholder in the case of a company incorporated under the laws of Italy as a società a responsabilità limitata, will be subordinated to all other creditors of that borrower and rank senior only to the equity in that borrower, if the loan is made when, taking into account the kind of business of the borrower, there was an excessive imbalance of the borrower’s indebtedness compared to its net assets or the borrower was already in a financial situation requiring an injection of equity and not a loan (“undercapitalization”). Any payment made by the borrower with respect to any such loan within one year prior to a bankruptcy declaration would be required to be returned to the borrower. The above rules apply to shareholders’ loans “made in any form” and scholars generally conclude that such provisions should be interpreted broadly and apply to any form of financial support provided to a company by its shareholders, either directly or indirectly. As of the date hereof, there are several court precedents interpreting the provisions summarized above. Some of such precedents have, however, held that Article 2467 of the Italian Civil Code also applies to companies incorporated as società per azioni, hence potentially to the borrowers under the intercompany loans and notes that are a società per azioni. Therefore, upon the occurrence of the circumstances provided for by the relevant provisions of the Italian Civil Code, an Italian court may conclude that the obligations of any Italian subsidiary under an intercompany loan or note with respect to which such Italian subsidiary is the debtor are subordinated to all of its obligations to other creditors and senior only to equity. If an Italian court so concludes, we may not be able to recover any amounts under such intercompany loans and notes, which could have a material adverse effect on our ability to meet our payment obligations under the Notes. Moreover, if the obligations of an Italian subsidiary under any intercompany loans or notes is subordinated by operation of law, the ability of the holders of Notes to recover under any security interest in such intercompany loans or notes may be impaired or restricted. General The procedures for the enforcement of Italian law security and the timing for obtaining judicial decisions (including in relation to security enforcement) in the Republic of Italy are materially complex and time-consuming, especially given that the Italian courts maintain a significant role in the enforcement process, in comparison to other jurisdictions with which investors may be familiar.
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LISTING AND GENERAL INFORMATION Listing and Admission to Trading Application has been made for the Notes to be listed on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market of Euronext Dublin, in accordance with the rules and regulations of Euronext Dublin. Irish Listing Information For so long as the Notes are listed on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market of Euronext Dublin, and the rules and regulations of Euronext Dublin so require, we will make available the notices to the public on the website of Euronext Dublin, www.ise.ie, or in written form at places indicated by announcement, to be so published as previously mentioned, or by any other means considered equivalent by Euronext Dublin. For so long as the Notes are listed on the Official List of Euronext Dublin and admitted to trading on the Global Exchange Market of Euronext Dublin and the rules and regulations of Euronext Dublin so require, electronic copies of the following documents may be inspected and obtained free of charge at our registered offices, Marble Arch House, Second Floor, 66 Seymour Street, London W1H 5BT, England, during normal business hours on any weekday (Saturdays, Sundays and public holidays excluded):
our organizational documents;
the financial statements included in this Offering Memorandum;
the annual and the interim financial statements required to be provided under the captions “Description of the Notes—Reports;”
the Indenture (which includes the forms of the Notes); and
other material agreements described in this Offering Memorandum as to which we specify that copies thereof will be made available. We have instructed The Bank of New York Mellon SA/NV, Dublin Branch, to act as Irish Listing Agent and The Bank of New York Mellon, London Branch, to act as Paying Agent and Transfer Agent and The Bank of New York Mellon SA/NV, Luxembourg Branch, to act as Registrar. The Bank of New York Mellon SA/NV, Dublin Branch, is acting solely in its capacity as Irish Listing Agent for us (and not on its own behalf) in connection with the application for listing of the Notes on the Official List of Euronext Dublin and admission to trading on the Global Exchange Market of Euronext Dublin. We reserve the right to vary such appointments in accordance with the terms of the Indenture and, if so required by the internal rules and regulations of Euronext Dublin, will publish a notice of such change of appointment in a newspaper having general circulation in Ireland (which is expected to be the Irish Times) or on the official website of Euronext Dublin (www.ise.ie) or by any other means considered equivalent by Euronext Dublin. We accept responsibility for the information contained in this Offering Memorandum. To our best knowledge, except as otherwise noted, the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of this Offering Memorandum. This Offering Memorandum may only be used for the purposes for which it has been published. The expenses related to the inclusion of the Notes on the Official List of Euronext Dublin and the admission of the Notes to the Global Exchange Market of Euronext Dublin are expected to be approximately €5,000 (excluding VAT and disbursements).
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Clearing Information We are registered with Companies House at Crown Way, Cardiff CF14 3UZ, United Kingdom, under company number 09127533. Our telephone number is +44 (0) 207 535 3200. Our LEI code is 549300UQ6KHRCZDRGZ76.
The Notes have been accepted for clearance through the facilities of Euroclear and Clearstream under the following common codes and ISINs: Regulation S Global Notes Rule 144A Global Notes Common Code: 184499797 Common Code: 184499819 ISIN: XS1844997970 ISIN: XS1844998192 Our Legal Information We were formed as a business combination shell company under the laws of England and Wales on July 11, 2014 with the name “Georgia Worldwide Limited.” On September 16, 2014, we changed our name to “Georgia Worldwide PLC” and on February 26, 2015, we registered as a public limited company under the laws of England and Wales with the name “International Game Technology PLC.” Our registered offices are located at Marble Arch House, Second Floor, 66 Seymour Street, London W1H 5BT, England. Our directors can be contacted at the address of our registered offices. Our corporate purpose is not restricted by our articles and as such, pursuant to Section 31(1) of the U.K. Companies Act, its objects are unrestricted. The offering and sale of the Notes have been authorized by our Board of Directors on May 16, 2018. The Issuer is a holding company that does not generate significant revenues or hold significant assets other than the shares of its subsidiaries and loans to its subsidiaries. Guarantor Legal Information The Guarantees will be full and unconditional and joint and several. All Guarantors are wholly-owned subsidiaries of the Issuer and are accounted for within the audited consolidated financial statements included in the F-pages of the 2017 Annual Report on Form 20-F and “Item 1. Condensed Consolidated Financial Statements (Unaudited)” of the Report on Form 6-K. The audited consolidated financial statements included in the F-pages of the 2017 Annual Report on Form 20-F and “Item 1. Condensed Consolidated Financial Statements (Unaudited)” of the Report on Form 6-K include both Guarantors and non-Guarantor subsidiaries. For the three months ended March 31, 2018, the Issuer and the Guarantors collectively represented 43% ($513 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, the Issuer and the Guarantors collectively represented 30% ($528 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the Issuer and the Guarantors collectively represented 196% ($4,542 million) of the Group’s net assets. For the year ended December 31, 2017, the Issuer and the Guarantors collectively represented 43% ($2,130 million) of the Group’s consolidated total revenue and 31% ($514 million) of the Group’s consolidated Adjusted EBITDA. As of December 31, 2017, the Issuer and the Guarantors collectively represented 201% ($4,724 million) of the Group’s net assets. For the three months ended March 31, 2018, the non-Guarantor subsidiaries collectively represented 57% ($693 million) of the Group’s consolidated total revenue and for the trailing twelve months ended March 31, 2018, the non-Guarantor subsidiaries represented 70% ($1,212 million) of the Group’s consolidated Adjusted EBITDA. As of March 31, 2018, the non-Guarantor subsidiaries represented (96)% ($(2,223) million) of the Group’s net assets. For the year ended December 31, 2017, the non-Guarantor subsidiaries collectively represented 57% ($2,809 million) of the Group’s consolidated total revenue and 69% ($1,162 million) in consolidated Adjusted EBITDA. As of December 31, 2017, the non-Guarantor subsidiaries collectively represented (101)% ($(2,369) million) of the Group’s net assets.
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United States IGT Foreign Holdings Corporation IGT Foreign Holdings Corporation is an indirect, wholly-owned subsidiary of the Issuer. It was incorporated as a corporation under the laws of Delaware on December 19, 1991. It is registered with the Secretary of State of the State of Delaware under File Number 2282368. Its registered office is at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, United States. Pursuant to Article 3 of its certificate of incorporation, IGT Foreign Holdings Corporation’s corporate purpose is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. IGT Global Solutions Corporation IGT Global Solutions Corporation is an indirect, wholly-owned subsidiary of the Issuer. It was incorporated as a corporation under the laws of Delaware on December 23, 1980. It is registered with the Secretary of State of the State of Delaware under File Number 0905157. Its registered office is at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, United States. Pursuant to Article 3 of its certificate of incorporation, IGT Global Solutions Corporation’s corporate purpose is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. IGT US HoldCo IGT US HoldCo is a direct, wholly-owned subsidiary of the Issuer. It was incorporated as a corporation under the laws of Nevada on December 30, 1980. It is registered with the Secretary of State of Nevada under number C7491–1980. Its registered office is at 9295 Prototype Drive, Reno, Nevada, United States. Pursuant to Article 3 of its articles of incorporation, IGT US HoldCo’s corporate purpose is to engage in any lawful activity. IGT US OpCo IGT US OpCo is an indirect, wholly-owned subsidiary of the Issuer. It was incorporated as a corporation under the laws of Nevada on January 23, 1952. It is registered with the Secretary of State of Nevada under number C35–1952. Its registered office is at 9295 Prototype Drive, Reno, Nevada, United States. Pursuant to Article 3 of its articles of incorporation, IGT US OpCo’s corporate purpose is to engage in any lawful activity. Canada IGT Canada Solutions ULC IGT Canada Solutions ULC is a direct wholly-owned subsidiary of the Issuer. It was formed by amalgamation as an unlimited liability company under the laws of Nova Scotia on May 19, 2004. It is registered with the Registry of Joint Stock Companies of Nova Scotia under number 3089872. Its registered office is at 1959 Upper Water Street, Suite 900, Halifax, Nova Scotia, Canada. Pursuant to Article 2 of its memorandum of association, there are no restrictions on the objects or powers of IGT Canada Solutions ULC and the company shall expressly have the following powers: (a) to sell or dispose of its undertaking, or a substantial part thereof; (b) to distribute any of its property in specie among its members; and (c) to amalgamate with any company or other body of persons.
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Germany IGT Germany Gaming GmbH IGT Germany Gaming GmbH is an indirect, wholly-owned subsidiary of the Issuer. It was incorporated as a company with limited liability (Gesellschaft mit beschränkter Haftung) under the laws of the Federal Republic of Germany on November 2, 1989. It is registered in the commercial register of the local court of Münster under number HRB 17216. Its registered office is at Weseler Straße 252, 48151 Münster, Germany. Pursuant to Article 3 of its articles of association, IGT Germany Gaming GmbH’s corporate purpose is the production, service and the worldwide distribution of casino technology of all kinds. Italy The Italian Guarantor The Italian Guarantor is a direct wholly-owned subsidiary of the Issuer. It was constituted as a limited liability company (Società a Responsabilità Limitata) under the laws of the Republic of Italy on October 9, 2014. Its legal name is Lottomatica Holding S.r.l. It is registered with the Companies’ Register of Rome under registration number 13044331000. Its registered office is at Viale del Campo Boario 56/D, 00154, Rome, Italy. Pursuant to Article 4 of its articles of association, the Italian Guarantor’s corporate purpose is to conduct, not vis-à-vis the public the business of ownership and management of shareholdings in other companies or entities, also abroad. The Italian Guarantor can also carry out, directly or indirectly, through the acquisition of equity interests in companies or entities, also abroad, whichever activity concerning the organization, management and development of games, lotteries, both on its own and under concession. General Except as disclosed in this Offering Memorandum:
there has been no material adverse change in our financial position or prospects since December 31, 2017 (the date of our last available audited financial statements);
there has not been a significant change in our financial or trading position since March 31, 2018;
we are not aware of any interest of our current or prospective directors, including conflicting interests between their duties to us and other duties, that are material to the offering and sale of the Notes, nor are we aware of any such interests, including conflict of interest, of any of our current directors that have been or are material to the offering and sale of the Notes; and
neither the we or, as far as we are aware, any of our subsidiaries has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which we are aware), during the previous twelve months, which may have, or have had in the recent past, significant effects on our financial position or profitability. There are no potential conflicts between the duties owed by members of our board of directors to us and their private interests or other duties.
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LEGAL MATTERS Certain legal matters in connection with the Offering will be passed upon for us by White & Case LLP as to matters of United States Federal, New York, English and Italian law. Certain legal matters in connection with the Offering will be passed upon for the Initial Purchasers by Cahill Gordon & Reindel (UK) LLP, as to matters of United States Federal and New York law and Clifford Chance LLP as to matters of English law.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements incorporated in this Offering Memorandum by reference to the Annual Report on Form 20-F for the year ended December 31, 2017, and the effectiveness of internal control over financial reporting as of December 31, 2017 have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report (which contains an explanatory paragraph relating the Issuer’s restatement of its financial statements as described in Note 1 to the financial statements and also contains an adverse opinion on the effectiveness of internal control over financial reporting) incorporated herein.
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REGISTERED OFFICE OF THE ISSUER International Game Technology PLC Marble Arch House, Second Floor 66 Seymour Street London W1H 5BT England LEGAL ADVISORS TO THE ISSUER As to U.S. Federal, New York, English and Italian Law White & Case LLP White & Case LLP 5 Old Broad Street Piazza Diaz 2 London EC2N 1DW 20123 Milan United Kingdom Italy LEGAL ADVISORS TO THE INITIAL PURCHASERS As to U.S. Federal and New York Law As to English Law Cahill Gordon & Reindel (UK) LLP Clifford Chance LLP 24 Monument Street Piazzetta M. Bossi 3 London EC3R 8AJ 20121 Milan United Kingdom Italy INDEPENDENT AUDITORS PricewaterhouseCoopers LLP 101 Seaport Boulevard Suite 500 Boston, Massachusetts 02210 United States PAYING AGENT AND REGISTRAR IRISH LISTING TRANSFER AGENT AGENT The Bank of New York The Bank of New York Mellon The Bank of New York Mellon, SA/NV, Luxembourg Branch Mellon SA/NV, Dublin London Branch Vertigo Building Polaris Branch One Canada Square 2–4 rue Eugène Ruppert Riverside II London E14 5AL L2453 Luxembourg Sir John Rogerson’s Quay United Kingdom Luxembourg Grand Canal Dock Dublin 2 Ireland TRUSTEE BNY Mellon Corporate Trustee Services Limited One Canada Square London E14 5AL United Kingdom LEGAL ADVISORS TO THE TRUSTEE As to U.S. Federal, New York and English Law Hogan Lovells International LLP Atlantic House Holborn Viaduct London EC1A 2FG United Kingdom