Cornerstone enters into forbearance agreement with noteholders and lender Northwestern

By Carlise Newman

Chicago, July 15 - Cornerstone Propane LP has entered into forbearance agreements as of July 2 with its noteholders and Northwestern Corp. as lender under the partnership's senior secured credit facility.

Under the agreements, the noteholders and Northwestern have agreed to forbear from exercising their remedies against Cornerstone until Oct. 31, 2003. Northwestern has also extended the maturity of its loans under the senior secured credit facility until October 31.

As part of the forbearance agreement, Cornerstone has agreed to comply with certain additional covenants, consented to certain amendments to the note agreements with the noteholders, provided for an interest rate increase to 11.27% compounding monthly effective July 31, 2002 for all of the notes and provided additional security for the benefit of the noteholders and Northwestern.

The notes include its 7.53% senior secured notes due 2010, 7.33% senior secured notes due 2013, 8.08% senior secured notes due 2005, and 8.27% senior secured notes due 2009

In addition, Cornerstone has agreed with the noteholders that the make-whole amount on the notes would be determined as of Feb. 28, 2003, which is $66,403,520, and is due and payable. The make-whole amount will accrue interest from the effective date of the forbearance agreements at 11.27%, compounding monthly.

The noteholders have agreed to forbear from demanding the make-whole amount or the interest during the forbearance period. Cornerstone, a propane company based in Watsonville, Calif., made a $20 million payment to the noteholders and Northwestern in partial satisfaction of its accrued and unpaid interest obligations.

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