| Item 1.01 |
Entry into a Material Definitive Agreement
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On June 15, 2023 (the “Closing Date”), ATI Physical Therapy, Inc. (the “Company”) completed a transaction (the “Transaction”) to enhance the Company’s liquidity, as
previously described in the Current Report on Form 8-K filed by the Company with the U.S. Securities and Exchange Commission on April 21, 2023 (the “Signing Date 8-K”), and as approved by the Company’s stockholders at the Company’s annual meeting of
stockholders held on June 13, 2023.
Signing Date Definitive Documents
On the Closing Date, certain previously executed agreements became effective, including (i) Amendment No. 2 to Credit Agreement (the “Credit Agreement Amendment”), by,
among others, ATI Holdings Acquisition, Inc., as borrower (“Opco”), Wilco Intermediate Holdings, Inc. (“Holdings”), Barclays Bank PLC, as administrative agent and issuing bank (the “Administrative Agent”), and the lenders party thereto, which amends
that certain Credit Agreement, dated as of February 24, 2022 (the “2022 Credit Agreement” and together with the Credit Agreement Amendment, the “Credit Agreement”), by, among others, Opco, Holdings, the Administrative Agent and the lenders party
thereto, (ii) a Second Lien Note Purchase Agreement (the “Original Note Purchase Agreement”), by, among others, the Company, Wilco Holdco, Inc. (“Wilco”), Holdings, Opco, the purchasers from time to time party thereto (the “Purchasers”) and
Wilmington Savings Fund Society, FSB, as purchaser representative (the “Purchaser Representative”) and (iii) certain other definitive agreements relating to the Transaction (such documents referred to collectively as the “Signing Date Definitive
Documents”).
Closing Date Definitive Documents
In addition, on the Closing Date, the Company entered into or filed with the Secretary of State of the State of Delaware, as applicable, certain other agreements
(collectively, the “Closing Date Definitive Documents”) to implement certain terms of the previously described Amended and Restated Transaction Support Agreement (the “A&R TSA”), dated as of April 17, 2023, by and among the Company and certain of
the Company’s affiliates, certain of its first lien lenders under the 2022 Credit Agreement, the Administrative Agent, holders of its Series A Senior Preferred Stock (the “Preferred Equityholders”) and holders of the majority of its Class A common
stock, par value $0.0001 per share (the “Common Stock”). The Closing Date Definitive Documents include (i) the First Amendment to Note Purchase Agreement (together with the Original Note Purchase Agreement, the “Note Purchase Agreement”), dated as of
the Closing Date, by and among the Company, Wilco, Holdings, Opco, the Purchasers party thereto (in such capacity, the “First Amendment Purchasers”) and the Purchaser Representative, pursuant to which the First Amendment Purchasers agreed to
purchase, and the Company agreed to issue, an additional $3,243,302.02 aggregate principal amount of Notes, (ii) the Consent to Amendment No. 2 to Credit Agreement, dated as of the Closing Date, by, among others, Opco, Holdings, the lenders party
thereto and the Administrative Agent, which amends the Credit Agreement Amendment, (iii) the First Amended and Restated Certificate of Designation of Series A Senior Preferred Stock of the Company, dated as of June 15, 2023 (the “A&R Series A
COD”), which, as agreed under the A&R TSA, (A) revised the Preferred Equityholders’ preexisting rights to designate and elect one director to the Company’s board of directors (the “Board”) to provide that the Preferred Equityholders have the
right to appoint three additional directors to the Board (resulting in the right of the Preferred Equityholders to appoint a total of four directors to the Board) until such time after the Closing Date that the Lead Purchaser (in each case, as
defined in certain of the transaction agreements entered into in connection with the original issuance of the Series A Senior Preferred Stock) ceases to hold at least 50.1% of the Series A Preferred Senior Stock held by it as of the Closing Date, and
(B) removed the provision that eliminated the Preferred Equityholders’ director designation rights upon the Company’s achievement of certain amounts of EBITDA; (iv) the First Amendment to that certain Investors’ Rights Agreement, dated as of February
24, 2022, by and among the Company and the Preferred Equityholders listed therein (the “Investors’ Rights Agreement Amendment”), which made changes similar to those under the A&R Series A COD and further provided that (A) all designee directors
of the Preferred Equityholders will be subject to consideration by the Board (acting in good faith and consistent with their review of other Board candidates) and (B) at least one director appointed in accordance with the A&R Series A COD be
unaffiliated with (and independent of) the Preferred Equityholders and meet the definition of “independent” under the listing standards of the New York Stock Exchange, and by the Securities and Exchange Commission; (v) the Certificate of Designation
of Series B Preferred Stock of the Company, dated as of June 15, 2023 (the “Series B COD”), which Series B Preferred Stock is further described below, (vi) the Registration Rights Agreement, dated as of June 15, 2023, by and among the Company and the
Purchasers with respect to the resale of shares of Common Stock into which such notes are convertible; and (vii) such other related documents and ancillary agreements required to implement the Transaction.
Issuance of New Second Lien PIK Convertible Notes and Series B Preferred Stock
On the Closing Date, pursuant to the Note Purchase Agreement and the other Signing Date Definitive Documents, the Company (i) exchanged $100.0 million of the aggregate
principal amount of the term loans under the 2022 Credit Agreement held by certain of the Preferred Equityholders for $100.0 million aggregate principal amount of a new stapled security, comprised of (A)
second lien PIK convertible notes (the “Notes”) and (B) shares of Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), which provide the holder thereof with voting rights such that the holders thereof have the right
to vote on corporate matters on an as-converted basis as if the conversion occurred at an initial price per share equal to $12.87, and (ii) issued to the First Amendment Purchasers, and the First Amendment Purchases purchased from the Company, an
aggregate principal amount of $3,243,302.02 million in Notes and shares of stapled Series B Preferred Stock.
Holders of the Notes will also receive additional Notes upon the in-kind payment of interest on any outstanding Notes. The Notes are convertible into shares of Common
Stock at a fixed conversion price of $12.50 (which reflects the 1-for-50 reverse stock split effective as of June 14, 2023), subject to adjustment.
This discussion of the Transaction does not purport to be complete and is qualified in its entirety by reference to the Signing Date Definitive Documents, which are
further described in and certain of which are filed as exhibits to, the Signing Date 8-K, and the Closing Date Definitive Documents, which are filed with this Current Report on Form 8-K and incorporated herein by reference. You should read the
Signing Date 8-K, including the exhibits thereto, carefully and in its entirety, in addition to this Current Report on Form 8-K.