Eye Care Centers fails to receive consents for 10¾% notes, plans alternative financing, tender continues

New York, May 25 - Eye Care Centers of America Inc. said it did not receive sufficient consents to amend its 10¾% senior subordinated notes due 2015 by the consent deadline.

However the underlying tender offer continues, and is due to expire at midnight ET on June 5 although Eye Care Centers said it may be extended so that it coincides with the closing of the acquisition of the company.

Because it did not receive sufficient consents, Eye Care Centers said it will use a different financing structure, which does not require a change to the note indenture.

Holders who tender their notes in the will receive $1,010 per $1,000 principal amount.

Eye Care Centers also said that it will carry out a change-of-control tender offer when the acquisition closes.

The tender offer and consent solicitation was announced on May 8. Eye Care Centers said it was offering $1,030 per $1,000 principal amount, which includes a consent payment of $20 per $1,000. Only holders who tender with consents by 5 p.m. ET on May 19 will receive the consent payment - although since the consent solicitation failed no one will now receive that payment.

Eye Care Centers will also pay accrued interest up to but excluding the payment date.

The company was also soliciting consents to amend the note indenture to eliminate substantially all of the covenants and certain events of default.

The offer is being conducted as part of the acquisition of Eye Care Centers by Highmark Inc.

Eye Care's obligation to complete the offer is subject to closing of the acquisition by Highmark and Eye Care Centers borrowing enough funds to fund the tender. There is no consent condition.

The proposed new financing structure calls for Highmark's HVHC Inc. subsidiary to enter into new senior secured credit facilities to refinance its existing debt and fund part of the purchase price for Eye Care Centers.

Eye Care Centers will also enter into new senior secured credit facilities, which will be secured by liens on substantially all its assets and those of its subsidiaries, but will not be guaranteed by HVHC or Highmark or any of their other subsidiaries.

Eye Care Centers said its creditors should not expect to rely on Highmark or HVHC for satisfaction of any of its liabilities following the merger.

Citigroup Corporate and Investment Banking is dealer manager and solicitation agent (800 558-3745 or call collect 212 723-6106). Global Bondholder Services Corp. is the information agent (866 387-1500 or 212 430-3774).

Eye Care Centers is a San Antonio-based retail optical chain.

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