LSB Industries may tender for convertible preferreds

By Angela McDaniels

Seattle, Nov. 14 - LSB Industries, Inc. said it may hold a tender offer for its $3.25 convertible exchangeable class C preferred stock series 2.

The announcement follows the company's agreement with some preferred shareholders under which the shareholders agreed to exchange 180,450 shares of the preferreds for 1,335,330 shares of common stock - which is equivalent to 7.4 shares of common stock per share of preferred stock - should the company hold a tender or exchange offer within one year.

The agreement was entered into on Nov. 10 with Kent C. McCarthy, Jayhawk Capital Management LLC, Jayhawk Institutional Partners LP and Jayhawk Investments LP, according to an 8-K report filed with the Securities and Exchange Commission on Tuesday.

The shareholders waived all rights to accrued dividends on any preferreds tendered or exchanged. As of Tuesday, the accrued dividend was $23.2625 per share, or $4.2 million for all of the preferreds covered by the agreement.

Under the agreement, the shareholders also agreed to vote to amend the terms of the preferreds to allow LSB Industries to acquire shares of its common stock for a period of five years without the approval of the preferred shareholders and to change the existing right of the preferred shareholders to elect two directors to the company's board of directors when dividends on the convertible preferreds are unpaid so that the right may only be exercised as long as at least 140,000 shares of the preferreds remain outstanding.

The shareholders under the agreement hold 340,900 shares of the preferreds, or 68.3% of the shares outstanding.

Exchange almost complete

In addition, the company will issue 777,655 shares of its common stock in exchange for 104,548 shares of the preferreds pursuant to exchange agreements entered into on Oct. 6, Oct. 11, Oct. 12 and Oct. 25.

LSB Industries said it will be able to complete the exchanges now that the American Stock Exchange has approved the listing of the new shares.

For the exchange, the shareholders agreed to waive their rights to all accrued dividends, amounting to $2.4 million.

The Oklahoma City-based manufacturer of climate-control products noted that 499,102 shares of the preferreds will remain outstanding following the exchanges.

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