Haights Cross again extends offer to exchange 12½% notes for shares

By Susanna Moon

Chicago, July 28 - Haights Cross Communications, Inc. said it again delayed the deadline for the exchange offer and consent solicitation for its 12½% senior discount notes due 2011.

The offer now expires at 11:59 ET on July 30, extended from July 20 and, before that, July 13 and July 6.

As of the close of business on July 27, investors had tendered $100 million, or 74%, of the notes - unchanged from July 13.

As previously announced, unless the company is able to timely complete the exchange offer, it expects to take advantage of the 30-day grace period for paying the semiannual interest of about $8.4 million due Aug. 3 on the notes.

The company's current forbearance agreement and credit agreement for its senior secured term loan prohibits it from making interest payments on the notes while the company remains in default under the credit agreement. The cure of such default will require the completion of the exchange offer.

The company said on June 8 that it planned to restructure its debt through a voluntary exchange of the notes for Haights Cross common stock.

Under the restructuring, the company said it plans to issue 120.21 shares of common stock for each $1,000 principal amount at maturity of notes exchanged, or a total of 16.23 million shares of common stock if all $135 million principal amount at maturity of notes are exchanged.

Haights Cross said these shares would represent at least 89% of the outstanding shares of common stock of the company immediately after the closing of the exchange offer.

Immediately before the exchange offer closing, the company would effect a one-for-five reverse stock split, which would convert holdings of currently outstanding shares and warrants to purchase shares of common stock into about 2.01 million shares, or 11% of the outstanding shares immediately after closing, assuming 100% of the notes are exchanged.

Affiliates of Monarch Alternative Capital, LP, which are Haights Cross stockholders and holders of roughly 33% of the outstanding notes, have agreed to support this restructuring.

Covenant changes

Along with the exchange offer, Haights Cross said it plans to solicit consents from eligible noteholders to amend the notes indenture to eliminate or substantially modify all of the restrictive covenants and change some of the events of default and other provisions.

Eligible holders who tender notes under the exchange offer must also consent to the amendments, and the amendments will not take effect until the exchange offer is completed.

Restructuring plan

The company said the exchange offer and consent solicitation are part of a restructuring plan that includes an amendment to its credit agreement and related transactions, under which Haights Cross would no longer be in default under the credit agreement.

Haights Cross said it will also offer to issue five-year warrants to purchase 1.48 million shares of common stock to its existing stockholders at an exercise price of $7.40 per share as part of the overall restructuring.

These shares would represent about 7.5% of Haights Cross' outstanding shares and warrants if all the notes are exchanged.

If the exchange offer and restructuring are not successfully completed, Haights Cross said it will explore all other restructuring alternatives, including a Chapter 11 bankruptcy filing.

Exchange conditions

According to the release, the completion of the exchange offer is subject to the valid tender of at least 95% of the total principal amount at maturity of outstanding notes, the execution of the credit facility amendment and holders of a majority of the outstanding shares of common stock consenting to an amendment to the company's certificate of incorporation to adopt the reverse stock split, an increase in Haights Cross' authorized shares of common stock and to adopt cumulative voting for the election of directors.

The company said beneficial holders of a majority of its outstanding common stock have agreed to the certificate of incorporation amendments and have also agreed to terminate the operative provisions of the existing stockholders agreement so there will be no further agreements regarding the election of directors or participation in future offerings following the closing of the exchange offer.

Haights Cross is a White Plains, N.Y.-based educational and library publisher.

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