Allied Defense agrees to convertible notes restructuring

By Caroline Salls

Pittsburgh, June 20 - Allied Defense Group, Inc. has entered into definitive agreements with the holders of its $30 million convertible notes to recapitalize the company and resolve all outstanding disputes of default between Allied Defense and its debt holders, according to a company news release.

Allied Defense said the convertible noteholders have agreed to amend some of the terms of the existing notes, provide up to $15 million in new funding and release the company of all alleged defaults and penalties under the convertible note agreement.

The transaction is subject to various closing conditions, including approval of the American Stock Exchange, and is expected to close within five business days.

Under the terms of the agreement, the company will exchange the existing $30 million of convertible debt for $27.1 million in senior secured notes carrying an 8.95% coupon, payable quarterly, and convertible into shares of Allied Defense Group's common stock at a price of $9.35 per share.

Existing noteholders will also receive 1.288 million shares of common stock in exchange for their notes.

Allied Defense will also receive $15 million of new cash funding, subject to similar interest and conversion provisions as the $27.1 million notes.

Of the $15 million in new funding, the release said $5 million will be made available immediately upon closing. The remaining $10 million will become available once wholly owned subsidiary Mecar SA is awarded an expected ammunition contract.

The company said it is currently working to establish a performance bond guarantee, which is a final requirement before the client can issue the contract award to Mecar.

"This restructuring will recapitalize the company and eliminate any uncertainties associated with the alleged defaults under the original notes," president and chief executive officer John J. Marcello said in the release.

"The management team and board of directors believes that this restructuring is in the best interests of all shareholders and one of several steps needed to refocus the company on a path of maximizing shareholder value."

Based in Vienna, Va., Allied Defense develops ammunition for defense departments and produces electronic and microwave security systems.

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