Foster Wheeler fixes interest rate on new notes at 10.507%

New York, Aug. 26 - Foster Wheeler Ltd. said the new series A senior secured notes due 2011 to be issued by Foster Wheeler LLC in its equity-for-debt exchange will pay interest at 10.507%.

The figure, which assumes an expiration date of Aug. 30, was set as 665 basis points over the yield on the U.S. Treasury note having the same maturity as the new notes.

If the exchange is extended beyond Aug. 30 the rate will be recalculated.

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.

Under terms of the exchange offer, as revised on July 1:

* 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 point 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.

Rothschild Inc. is dealer manager for the exchange.

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