BMC Industries anticipates defaulting on loans

By Sara Rosenberg

New York, Aug. 19 - BMC Industries Inc. anticipates being in default under its credit agreement as of either Aug. 28 or Sept. 15 and considers it unlikely that alternative arrangements will be reached prior to the expiration of the most recent waiver on Sept. 15. Under these circumstances, if lenders opt to accelerate all outstanding debt, BMC would need to refinance or restructure its debt and, if unsuccessful in these efforts, may consider seeking bankruptcy protection.

The company continues to work with its lenders and advisors to secure a longer-term alternative to the existing financing arrangement or another agreement for the restructuring of outstanding debt, including relief from certain covenants, extended payment terms and additional borrowing capacity, according to a news release.

As of June 30, BMC was not in compliance with several covenants, including failing to make $3.5 million in scheduled principal payments and failure to meet a total debt to trailing 12-month EBITDA ratio of 3.5 times.

On July 1, the company also failed to make a payment of $1 million in fees due on that date.

On July 2 BMC received a waiver from its banks regarding certain covenants and on July 16 the company received an additional 60-day waiver from its banks regarding these covenants, providing additional time for the company to make certain scheduled principal payments and fees. Furthermore, at that time, the banks and the company agreed that no additional borrowings will be extended during the waiver period.

Deutsche Bank Trust Co. Americas is the administrative agent and Bank One is the documentation agent for the facility.

As of June 30 total debt was $130.7 million, compared to $113.1 million at March 31 and $112.3 million at Dec. 31, 2002. The increase in total debt was attributed to lower earnings and significant increases in working capital needs during the quarter.

BMC is a Minneapolis producer of polycarbonate, glass and plastic eyeware lenses, and manufacturer of precision photo-etched metal and electroformed parts, aperture masks used in color TV and computer monitors.

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