Lexington Precision completes refinancing

By Peter Heap

New York, Dec. 19 - Lexington Precision Corp. said it completed a refinancing of substantially all its debt - ending a saga that began in mid-2002.

Included in the transactions were a new $37 million secured credit facility, a new $11.5 million secured term loan, repurchase of the company's $7.5 million senior unsecured note, exchange of the company's senior subordinated notes and exchange of its junior subordinated notes.

The new $37 million credit facility is made up of a $23.5 million revolving credit facility due June 30, 2006 with interest at Libor plus 325 basis points or prime plus 100 basis points and a $13.5 million term loan at Libor plus 375 basis points or prime plus 150 basis points. Revolver borrowings are limited to 88% of eligible accounts receivable plus 65% of eligible inventories. The term loan amortizes over 45 months at $300,000 per month, beginning on Feb. 1, 2004. The balance is due on June 30, 2006 if the revolver is not extended. Security for the facility is a first priority lien on substantially all of the company's assets other than real property.

The $11.5 million secured term loan carries interest of prime plus 400 basis points with a floor of 8.25%. Lexington Precision must pay a 1.875% fee at closing and on each anniversary of closing. The loan is payable in monthly installments of $96,000 each from Jan. 1, 2004 through June 1, 2006, with the balance due on June 30, 2006. The company has the option to extend the loan to June 30, 2007 on the same terms. The loan is secured by first mortgages on substantially all of the company's real property and by second priority liens on substantially all of the company's other assets.

Lexington Precision repurchased a $7.5 million senior unsecured note and all accrued but unpaid interest for $5.81 million.

The company also completed an exchange of its 12¾% senior subordinated notes. Holders received units made up of new 12% senior subordinated notes due Aug. 1, 2009 at the rate of $1,558.52 principal amount for each $1,000 principal amount of old notes, representing the principal amount plus accrued but unpaid interest on the old notes. Also in the units were 10 warrants to buy common stock per $1,000 principal amount.

Holders of $27.254 million or 99.4% of the old notes participated in the exchange, resulting in the issuance of units for $42.476 million of new notes and 424,781 warrants. The new notes are redeemable at any time at par plus accrued and unpaid interest. The warrants are to buy the company's common stock at a price of $3.50 per share from Aug. 1, 2005, through Aug. 1, 2009. Before Aug. 1, 2005, the warrants will only trade as a unit with the notes and if any of the notes are redeemed the attached warrants will be retired for no additional value.

Lexington Precision also exchanged units consisting of $347,000 of new 13% junior subordinated notes due Nov. 1, 2009 and 3,467 Warrants for its outstanding 14% junior subordinated notes and exchanged 103,731 shares of its common stock for the $235,000 of interest that was accrued and unpaid on the old junior subordinated notes.

As previously announced, Lexington Precision, a New York-based manufacturer of rubber and metal components for the automobile and medical devices industries, began its original exchange offer for its $27.412 million outstanding 12¾% notes on July 10, 2002. The original expiration deadline was extended numerous times.

The original offer terms were subsequently amended, first on March 7, and then more recently, on Sept. 18. Under the terms of the latter amendment, which is the version of the offer currently in effect, Lexington is offering to exchange units made up of new 12% senior subordinated notes due Aug. 1, 2009, plus warrants, for the existing notes (it raised the coupon on the new exchange notes to 12% from 11½% previously, and extended the maturity to 2009 from the previously announced 2007).

For each $1,000 principal amount of the old notes tendered under the newly revised terms of the offer, noteholders will receive new notes with a principal amount equal to the principal amount of their old notes plus accrued interest on the old notes from Aug. 1, 1999 through the day before the exchange is completed, and will also receive 10 warrants to buy the company's common stock at $3.50 per share, which are good through Aug. 1, 2009.

Lexington also eliminated the $30 per $1,000 participation fee it had previously been offering to pay in the exchange.

The company said the amended exchange would be conditioned on at least 99% by principal amount of the old notes being tendered. It is also subject to Lexington Precision completing new senior secured financing on acceptable terms and the redemption of its other debt on acceptable terms.

As of Sept. 17 under the old offer, Lexington Precision had accepted tenders of $27.209 million of the old notes or 99.3% of the amount outstanding. The company said the four largest holders, representing $20.49 million of the notes, or 74.7% of the outstanding amount, had tendered under the new terms and do not intend to withdraw their notes.

Lexington - which has extended the offer several times since announcing its most recent amendment on Sept. 18 - has not released any updated information on noteholder participation levels.

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