Foamex begins second-lien term loan for stock exchange offer

By Sara Rosenberg

New York, June 25 - Foamex International Inc. commenced its offering to exchange second-lien loans at par for common stock, as well as its rights offering, according to a 424B2 filed with the Securities and Exchange Commission Wednesday.

These offerings are expected to expire on July 24 and close on or prior to Aug. 7.

Second-lien term loan lenders are being offered shares of the company's common stock at a purchase price per share of $0.65.

There is currently about $175 million outstanding under the second-lien loan.

The company has entered into an equity commitment with certain significant stockholders under which those stockholders have agreed to acquire $100 million of the company's common stock, at $0.65 per share, by assignment of second-lien loans and/or in cash.

Eligible participants, other than the significant stockholders, who subscribe for shares of the company's common stock prior to July 9 will receive an early participation premium in the form of additional shares of common stock equal to 2%.

Concurrent with the debt for stock exchange offer, the company is doing a rights offering to holders of its common stock. Each right entitles participants to purchase 7.132 shares of common stock at $0.65 per share.

If all holders of rights, other than the significant stockholders, fully exercise their rights in this offering, Foamex's cash proceeds would be about $70.6 million. Under the terms of the company's first-lien term loan, those net cash proceeds must be used to repay a portion of the first-lien term loan debt.

The transactions are being made to deleverage the company, to decrease its interest expense and to increase its financial stability.

Foamex is a Linwood, Pa.-based manufacturer of flexible polyurethane and advanced polymer foam products.

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