ClimaChem looking to buy back $52 million notes from investor, seeking loan amendment

New York, May 20 - ClimaChem, Inc. said it is finalizing a repurchase of $52 million of its 10¾% senior unsecured notes with an investor.

The Oklahoma City, Okla. ammonium chemicals and climate control company also said that it is seeking an amendment to the EBITDA (earnings before interest, taxation, depreciation and amortization) covenant in its working capital facility to avoid non-compliance.

It also cautioned that the outcome of negotiations to amend the credit facility may affect its ability to make the interest payment due June 1.

ClimaChem said in a filing with the Securities and Exchange Commission that it has negotiated a term sheet with an investor representing $52 million face amount of the notes. As of March 31, the company had $75.1 million of the notes outstanding.

Under the term sheet, the investor and/or its affiliates will loan $34 million to ClimaChem which will use those funds to repurchase the notes owned by the investor and its affiliates at "a substantial discount" to face value, to pay fees and expenses and to fund a cash collateral account.

The new loan would be secured by some assets of LSB Industries, Inc. (ClimaChem's parent), ClimaChem and some of their subsidiaries and would be guaranteed by LSB and some subsidiaries.

In addition, the investor will receive 10-year warrants to buy up to 4.99% of LSB's outstanding common stock at a nominal price.

ClimaChem said it is finalizing the agreement and expects to close during the second quarter of 2002, although it added there can be no assurances the transaction will be closed. The company also needs the consent of the lender under its working capital revolving credit facility and must eliminate some provisions in the note indenture.

ClimaChem said the working capital lender has tentatively agreed to the note repurchase and to amending the EBITDA covenant, according to the SEC filing.

The company said it needs to amend the covenant because it does not anticipate complying with the trailing 12-month EBITDA requirement for the period ending June 30 due to storm damage at its El Dorado, Ark. facility which interrupted its industrial-grade ammonium nitrate business and an anticipated delay obtaining its license to manufacture high-explosive products.

If the note repurchase is not completed by June 30, ClimaChem said it will ask its lender to waive non-compliance with the covenant.

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