Gilat Satellite starts proxy solicitation for debt restructuring

New York, Jan. 6 - Gilat Satellite Networks Ltd. started a proxy solicitation from holders of its 4.25% convertible subordinated notes due 2005 to support a debt restructuring.

The solicitation runs until 11.59 p.m. ET on Feb 3. There will be a meeting of noteholders to vote on the restructuring plan at 10.00 a.m. Israel time on Feb. 5.

Support from holders of 75% of each class of debt and a majority by number is required for approval of the plan.

Under the proposed restructuring, the existing $350 million of 4.25% convertibles due 2005 will be exchanged for 202,083,908 ordinary shares and $83.254 million principal amount of new 4% convertible notes due 2012. Each $1,000 principal amount of existing notes will be exchanged for 577.38 ordinary shares and $237.87 in new notes. Fractional shares and fractional new notes will be rounded up to the next whole share or dollar.

For the $102 million Gilat owes to Bank Hapoalim BM, $25.5 million will be converted into 18,488,590 ordinary shares, $5.1 million into new notes with the same principal amount and the remaining $71.4 million will remain as a loan on revised terms. The revised terms include equal semiannual installments of principal of $4.463 million beginning on July 2, 2005, with a last installment of $8.925 million on July 2, 2012. Interest will be at six-month Libor plus 250 basis points.

The $30 million loan owed to Bank Leumi Le Israel BM will be revised. There will be annual principal payments of $1 million in 2003 and 2004 and annual principal payments of $4 million for 2005 through 2011. Interest will be at six-month Libor plus 250 basis points.

A hearing is schedule to approve the arrangement on March 6.

In November, the Petah Tikva, Israel satellite telecommunications company announced it had reached an agreement with its major bank lender and holder of a majority of its convertibles on the debt restructuring.

Information agent for the proxy solicitation is Georgeson Shareholder Communications, Inc. (866 328-5446, banks and brokers call 212 440-9800).

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