PRG-Schultz plans to redeem 11% notes, remaining 10% convertibles, 9% preferreds, replace loan

By Jennifer Chiou

New York, July 16 - PRG-Schultz International, Inc. plans to redeem its 11% senior notes due 2011 as well as any unconverted 10% senior convertible notes and 9% senior series A convertible participating preferred stock, according to an 8-K filing with the Securities and Exchange Commission.

As part of the refinancing, the Atlanta-based firm involved in recovery auditing and profit improvement also said it intends to replace its existing credit facility.

PRG added that it intends to solicit consents from holders of the 11% notes and 10% convertibles to amend the indentures to shorten the time period necessary to complete the refinancing.

The company entered into a conversion and support agreement with Blum Capital Partners, LP and certain of its affiliates, under which Blum will support the proposed refinancing by providing its consent in the solicitation and, if called for redemption, to convert all of the convertible notes and preferred shares it owns into common shares.

Blum has additionally agreed, as a lender under PRG's current credit facility, to support any amendment to or waiver of the relevant provisions of the credit facility to permit the simultaneous redemption of the notes.

According to the filing, Blum holds about 28% of the 11% notes, about 31% of the 10% convertibles and about 57% of the 9% preferreds.

PRG entered into an amended and restated standstill agreement linked to the support agreement with Blum.

Under the terms of the new standstill agreement, without the prior written consent of PRG's board of directors, Blum may not acquire or offer, make a proposal or agree to acquire any voting stock of the company or its subsidiaries if, after taking account of such acquisition, Blum will be the beneficial owner of more than 49.9% of the company's common stock.

Under the terms of the old standstill agreement, Blum was generally prohibited from beneficially acquiring any additional shares of the company's common stock and the limitation was lowered, on a share-for-share basis, every time Blum disposed of any shares.

PRG said that it is anticipated that Blum's beneficial ownership will be about 25% if all of its securities are converted into common stock.

Also, the new standstill agreement does not include any limitations on Blum's voting of the common and preferred shares of PRG.

The new standstill agreement will not become effective until PRG has received consent from the lenders under its current credit facility to enter into the agreement, and the earlier of when the holders of the 11% notes waive certain prohibitions under the indenture or PRG's obligations under the indenture are terminated.

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