International Textile extends $150.2 million tranche B notes to 2019

Remaining notes expected to be canceled

By Toni Weeks

San Luis Obispo, Calif., July 3 – International Textile Group, Inc. and holders of the company’s tranche B senior subordinated notes entered into the eighth amendment to the note purchase agreement, which was originally dated June 6, 2007.

The June 30 amendment extends the maturity of $150.2 million of the notes to June 30, 2019.

According to an 8-K filing with the Securities and Exchange Commission, the amendment does not affect any other provision of the tranche B notes, nor does it apply to the tranche B notes that are expected to be canceled upon final court approval of a stipulation and settlement agreement that the company negotiated in February.

As of June 30, the principal amount of notes that are expected to be canceled, plus accrued interest, totals $23.3 million. The company expects approval of the stipulation and settlement agreement to occur in the third quarter of this year.

As reported by Prospect News in February, the settlement agreement relates to a consolidated class-action lawsuit and affects the company’s senior subordinated notes due June 6, 2015, series A convertible preferred stock and series C preferred stock.

According to the 8-K, the tranche B notes are held by some entities who are affiliated with International Textile’s chairman of the board and hold about 89% of the company’s total voting power.

The company is a nominal defendant to the lawsuit, which relates to the combination of the company, which at the time was named Safety Components International, Inc., and a company formerly known as International Textile Group, Inc. The merger occurred in late 2006.

The consolidated action consolidated three factually identical lawsuits filed in 2008 and 2009 and named as defendants, among others, individuals who were officers and directors and some stockholders of the former International Textile or the current company, as well as an entity that acted as an independent financial adviser to the company in connection with the merger.

The plaintiffs contended that some of the non-company defendants breached fiduciary duties and have also made related claims in connection with the merger.

The stipulation and settlement agreement, preliminarily approved on Feb. 19 by the Court of Common Pleas, Greenville County, S.C., provides that, besides the cancellation of $21.9 principal amount of the senior subordinated notes, non-company defendants will make an aggregate $36 million cash payment that includes a $16 million cash payment from the independent financial adviser and its insurers and a $20 million cash payment from other non-company defendants and their insurers.

In addition, 10,315,727 shares of the company's series A convertible preferred stock, having a liquidation value of $257.9 million as of Dec. 31, 2013, and 11,488 shares of the company's series C preferred stock, having a liquidation value of $11.5 million as of Dec. 31, 2013, will be canceled, together with any additional shares of series A and series C preferreds that accrue through the effective date of the settlement agreement.

As of Dec. 31, 2013, the company had outstanding a total of $163.5 million principal and accrued interest of senior subordinated notes, series A preferreds with an aggregate liquidation value of about $337 million and series C preferreds with an aggregate liquidation value of roughly $126 million.

If the settlement agreement receives final approval by the court, the affected notes and preferreds will be canceled, and the company's respective obligations and the affiliates' respective rights will be terminated, effective as of Dec. 31,2 013.

The company said before that it expects when these cancellations take effect, they will not have an impact on its consolidated statements of operations but will have an impact on its consolidated balance sheet by reducing its long-term debt and stockholders' deficit.

The hearing to consider final approval of the settlement agreement was scheduled for June 23.

The textile manufacturer is based in Greensboro, N.C.

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