Foster Wheeler reports "significant" response to amended exchange offer

New York, Aug. 3 - Foster Wheeler Ltd. said "significant numbers" of institutional investors have now agreed to tender their securities under its amended exchange offer.

The company said that so far investors holding 61.0% of its 6¾% senior notes due 2005, 85.0% of its 6½% convertible subordinated notes due 2007, 92.6% of the Robbins series C and D bonds due 2009 and 22.2% of the 9% preferred securities have agreed to tender.

As reported July 30, the company said the Securities and Exchange Commission has declared the registration statement for the revised terms of the exchange effective.

"This is a significant milestone as we move toward the completion of our balance sheet restructuring, which we expect to complete in the third quarter," said Raymond J. Milchovich, chairman, president and chief executive officer of Foster Wheeler, in a news release Tuesday.

"We appreciate the hard work and commitment of the investors who have executed lock-up agreements, as well as the confidence in Foster Wheeler of those who will accept equity in the newly capitalized company in exchange for debt. The completion of the amended exchange as proposed will improve our financial position and provide important financial flexibility for all of our operating companies."

Completion of the exchange is subject to tenders of at least 75% of the trust securities, 90% of the convertible notes, 90% of the series C Robbins bonds and series D Robbins bonds, 20% of the 2024 series C Robbins bonds and 90% of the 2005 notes.

At its previous report on July 30, the company said that at the close of business on July 29, holders had tendered: $18.80 million of the company's 9% preferred securities; $838,000 of its 6.5% convertible subordinated notes; $6.27 million of its Robbins series C bonds due 2024, $45,000 of its Robbins series C bonds due 2009 and $91,000 of its Robbins series D bonds; and $12.59 million of its 6¾% senior notes.

Those were in turn up substantially from the last report in which the company said that as of the close of business on July 8, holders had tendered: $2.51 million of the company's 9% preferred securities; $23,000 of its 6.5% convertible subordinated notes; $21,000 of its Robbins series C bonds due 2024, $7,000 of its Robbins series C bonds due 2009 and $2,000 of its Robbins series D bonds; and $7.09 million of its 6¾% senior notes.

Foster Wheeler said on July 1 it had amended its equity-for-debt exchange offer.

The Clinton, N.J., engineering and project services company said the changes modify some of the terms and conditions of the offer. The amended exchange will include a minimum participation threshold and adds the distribution of warrants.

The terms of the revised exchange are:

* Holders of the 9% preferred securities issued by FW Preferred Capital Trust I will receive 0.760 common shares, 0.0123 preferred shares and one warrant to purchase common shares for each trust security with a liquidation amount of $25. No accumulated dividends will be paid;

* Holders of the 6.5% convertible subordinated notes due 2007 will receive 160.600 common shares and 1.517 preferred shares plus accrued interest through the date of the exchange for each $1,000 principal amount;

* Holders of the series C Robbins bonds maturing in 2009 will receive 192.900 common shares and 1.817 preferred shares plus accrued interest through the date of the exchange for each $1,000 principal amount;

* Holders of the series C Robbins bonds due 2024 will receive 160.600 common shares and 1.517 preferred shares plus accrued interest through the date of the exchange for each $1,000 principal amount;

* Holders of the series D Robbins bonds will receive 192.900 common shares and 1.817 preferred shares for each $1,000 accreted principal amount as of June 25;

* Holders of the $200 million principal amount of 6¾% senior notes due 2005 will receive for each $1,000 principal amount: $750 principal amount of fixed-rate senior secured notes due 2011 series A, 46.100 common shares and 0.437 preferred shares plus accrued interest through the date of exchange for a total of up to 9.22 million common shares, up to 87,400 preferred shares and up to $150 million principal amount of new notes. The interest rate on the new notes will be fixed two days before the expiration using a 665 basis points spread over a reference Treasury.

The new preferred shares will be convertible into 1,300 common shares once shareholders approve an increase in the number of authorized shares.

At the minimum required participation levels, the amended exchange will cut Foster Wheeler's existing debt by $410 million, extend the maturities on $135 million of debt to 2011, reduce interest expense by $22 million per year and, when combined with the sale of new notes to retire funded bank debt, eliminate substantially all material scheduled corporate debt maturities before 2011.

At the minimum participation levels and excluding the effect of the warrants, holders of Foster Wheeler's current common stock would end up with 5.1% of the voting equity securities. Holders of the 6¾% senior notes due 2005 will receive 13.8% of the voting equity securities, holders of the series C Robbins bonds due 2009 will receive 3.5% of the voting equity securities, holders of the series C Robbins bonds due 2024 will receive 4.1% of the voting equity securities, holders of the 6.5% convertible subordinated notes due 2007 will receive 50.4% of the voting equity securities and holders of the 9% trust preferred securities will receive 11% of the voting equity securities. A further 4.9% of the voting equity securities will be reserved for grants to management.

Holders of the trust preferreds will be issued five-year warrants for 15% of the company's fully diluted equity and holders of the common stock outstanding before closing of the exchange will receive a dividend in the form of three-year warrants for 5% of the company's fully diluted equity. Three-year stock options for 5% of the company's fully diluted equity will be reserved for management. The calculations are based on the minimum level of participation in the exchange.

As previously announced, Foster Wheeler has also obtained a commitment from a group of institutional holders of its debt securities to purchase $120 million of new senior secured notes due 2011. Proceeds will be used to repay the term loan and revolving debt outstanding under its existing senior secured credit agreement.

After closing of the exchange, the company said it intends to seek a new multi-year revolving credit agreement and letter-of-credit facility.

Foster Wheeler said on June 14 it had begun its previously announced equity-for-debt exchange offer. It originally said the exchange will run through 5 p.m. ET July 12.

The exchange is a series of transactions intended to reduce the company's leverage and extend the maturity of its notes due 2005.

Covered by the exchange are the company's 9% trust preferred securities series I issued by FW Preferred Capital Trust I, its 6.5% convertible subordinated notes due 2007, its series 1999 C Robbins bonds due 2009, series 1999 C Robbins bonds due 2024, series 1999 D Robbins bonds and its 6¾% senior notes series A due 2005 issued by Foster Wheeler LLC.

Under the original terms of the exchange:

* Each $25 liquidation amount of the 9% trust preferreds will be exchanged for either 2.781 common shares and 0.03 series B voting convertible preferred shares or $6.25 in cash. No accrued dividends will be paid;

* Each $1,000 principal amount of the 6.5% convertibles will be exchanged for 207.997 common shares and 2.240 series B voting convertible preferred shares plus accrued interest through the date of the exchange;

* Each $1,000 principal amount of series C 2009, series C 2024 and series D Robbins bonds will be exchanged for 213.759 common shares and 2.302 series B voting convertible preferred shares plus accrued interest through the date of the exchange (principal amount is accreted principal amount for series D bonds);

* Each $1,000 principal amount of 6¾% notes will be exchanged for $750 principal amount of 10½% series A senior secured notes due 2011 and 62.051 common shares and 0.668 series B voting convertible preferred shares plus accrued interest.

The new preferred shares will be mandatorily convertible into 80 common shares and will be entitled to dividends and distributions on an as-converted basis.

Foster Wheeler will offer for cash up to 19.467 million common shares and 210,000 preferred shares to holders of the existing convertibles and 2005 notes to the extent that holders of the trust preferreds pick cash rather than equity and preferreds.

Rothschild Inc. will be dealer manager for the exchange.

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