North Atlantic Trading noteholders agree to notes exchange

By Caroline Salls

Pittsburgh, March 21 - North Atlantic Trading Co., Inc. and parent North Atlantic Holding Co., Inc. said holders of a majority of North Atlantic Holding notes and a significant minority of North Atlantic Trading's notes have agreed in principle to participate in a notes exchange, according to an 8-K filing with the Securities and Exchange Commission.

In October, North Atlantic Trading and North Atlantic Holding retained Lazard Freres & Co. LLC as their financial adviser to assist in exploring and evaluating potential financial recapitalization alternatives.

Under the agreements, 100% of North Atlantic Holding's outstanding 12¾% senior discount notes due 2014 and 55% of North Atlantic Trading's outstanding 9¼% senior notes due 2012 would be exchanged for new North Atlantic Trading 10% second-lien secured notes due March 1, 2012.

Specifically, $950 principal amount of second-lien notes will be issued for each $1,000 principal amount of North Atlantic Trading notes exchanged, and $812.50 principal amount of second-lien notes will be issued for each $1,000 face amount of North Atlantic Holding notes exchanged.

Closing is expected to occur by May 11.

North Atlantic Trading will offer to repurchase 100% of the second-lien notes at 101% upon a change of control.

The second-lien notes will be redeemable on March 1, 2008 at 105%, declining to 102.5% on March 1, 2009 and thereafter declining yearly to par.

Before March 1, 2008, the second-lien notes will be redeemable at a price of 100% plus the applicable premium defined in the indenture.

In addition, North Atlantic Trading will be permitted to buy or provide funds to North Atlantic Holding to redeem and pay interest on any 12¾% discount notes outstanding after completion of the notes exchange.

There will be no fees paid in connection with the exchange.

North Atlantic is a New York-based vendor of tobacco products.

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