Forest City holders agree to exchange $138.9 million of convertibles

By Angela McDaniels

Tacoma, Wash., July 16 – Forest City Enterprises, Inc. will exchange $8,151,000 of its 5% convertible senior notes due 2016, $75,387,000 of its 4.25% convertible senior notes due 2018 and $55,407,000 of its 3.625% convertible senior notes due 2020, according to company news releases.

Under privately negotiated exchange agreements, the noteholders will receive class A common stock and cash in exchange for their convertibles.

For each $1,000 principal amount, noteholders will receive 71.8894 shares in exchange for the 5% convertibles, 46.1425 shares in exchange for the 4.25% convertibles and 41.3129 shares in exchange for the 3.625% convertibles, which is the same number of shares into which the notes are convertible.

Holders will also receive a cash payment for accrued interest, consideration with respect to additional interest that would have otherwise been payable through maturity and in lieu of fractional shares.

The total cash payment for the 5% convertibles will be about $1.3 million.

The total cash payment for the other two series exchanged will be in the range of $20.7 million to $30.7 million, depending on the daily volume-weighted average price of the class A common stock over a five-day trading period beginning July 16.

For the 5% convertibles, the exchange is expected to settle July 21. For the other two series of convertibles, the exchange will have a two-part closing with the expected settlement of shares on July 21 and the cash payment on July 27.

The company said the exchange transactions reflect its focus on reducing debt and improving its balance sheet.

The exchange transactions will result in a combined total of $138.9 million of the company's convertibles being exchanged, leaving $1.4 million of the 5% convertibles, $154.5 million of the 4.25% convertibles and $116.4 million of the 3.625% convertibles outstanding.

Cleveland-based Forest City Enterprises owns, develops, manages and acquires commercial and residential real estate.

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