Fleetwood announces convertible trust preferred exchange and new offer

By Peter Heap

New York, Dec. 6 - Fleetwood Enterprises, Inc. announced an exchange offer for its outstanding convertible trust preferred securities and also said it would be selling additional amounts of the new convertible trust securities for cash.

The Riverside, Calif. manufacturer of recreational vehicles and manufactured housing said the new convertible trust preferreds will carry a 9.75% dividend rate and mature Feb. 15, 2013. They will be issued through Fleetwood Capital Trust II.

They will be exchanged for up to $86.25 million liquidation amount of Fleetwood's existing 6% convertible trust preferred securities due Feb. 15, 2028 issued by Fleetwood capital trust.

Holders will receive $20 liquidation amount of new securities for each $50 liquidation amount of the old securities. The new convertibles will be subordinated to the company's senior debt but senior to any of the old convertibles that remain outstanding.

Up to $34.5 million liquidation amount of the new securities will be issued in the exchange.

Fleetwood will also offer a further $50 million of the new securities for cash.

The exchange offer expires at 5.00 p.m. ET on Jan. 4, 2002. The cash offer may close earlier.

The exchange is subject to at least $50 million liquidation amount of the old securities being tendered and the sale for cash of new securities with liquidation amount of at least 31% of the amount of old securities tendered in the exchange.

The cash sale is not conditional on any minimum amount being sold nor does it depend on the exchange being completed.

Banc of America Securities is dealer manager for the exchange.

The conversion price for the new convertibles will be the higher of either $8.40 per share or 12% more than volume-weighted average of the closing prices of Fleetwood's common stock on the five trading days leading up to the fourth trading day before the exchange expires, according to documents filed with the Securities and Exchange Commission.

Distributions on the convertibles will be payable in cash or stock until Feb. 15, 2004 and cash after that. Distributions after that date can be deferred for up to 20 quarters.

The securities will be callable from Feb. 15, 2004 onwards.

Fleetwood is making the exchange and cash offers to enhance liquidity and improve its balance sheet by increasing shareholders' equity, increasing its capacity to carry senior debt, the company said in the SEC filing.

If the exchange offer is fully subscribed and $50 million cash is received, Fleetwood will increase shareholders' equity by $30.3 million, according to the SEC filing.

If Fleetwood accepts the maximum $86.25 million liquidation amount of the existing convertibles and raises the minimum cash proceeds of 31% of the exchange size it will reduce its total amount of trust preferreds outstanding to $228 million from $287.5 million.

Part of the proceeds of the cash offer will be used to pay taxes incurred in the exchange and for fees and expenses. The remainder will be used for general corporate purposes, including the possible repayment of debt.

The two offers are part of a larger restructuring of the company's debt. On July 27, 2001, Fleetwood entered into a new senior secured facility through a syndicate led by Bank of America. Part of the proceeds were used to retire senior unsecured notes payable to The Prudential Insurance Co. of America. These notes had been covered by a forbearance agreement following defaults under the covenants.

The new credit facility is a three-year $190 million revolver and a two-year $30 million term loan. Interest is set by a pricing grid based on liquidity and fixed charge coverage. The revolver has rates ranging from Libor plus 225 to 375 basis points or prime flat to prime plus 150 basis points. The term loan is prime plus 300 basis points for the first year with increases and amortizations for the remainder of its outstanding period.

Covenants were recently amended to ensure Fleetwood complies in the "near future," according to the SEC filing. The change affected the EBITDA (earnings before interest, taxation, depreciation and amortization) covenant, replaced with a new covenant based on projected free cash flow. Also amended was the definition of the fixed charge coverage ratio.

Interest rates were increased 50 basis points for at least 90 days although they remained within the ranges in the initial grid.

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