Fleetwood begins exchange offer for 5% convertibles in attempt to avoid Dec. 15 put

By Angela McDaniels

Tacoma, Wash., Oct. 30 - Fleetwood Enterprises, Inc. began an exchange offer for its $100 million 5% convertible senior subordinated debentures due 2023 Thursday, according to a company news release.

The convertibles are putable on Dec. 15. Fleetwood may use cash, stock or a combination to pay for any puts, but the company said it is in its best interest to pursue this exchange offer in order to preserve liquidity and to avoid dilution of existing shareholders.

For each $1,000 principal amount of convertibles, holders who exchange will receive:

• $1,030 principal amount of new three-year senior secured notes, which are senior obligations of Fleetwood, secured by a first-priority lien on $20 million of unencumbered real estate assets of some Fleetwood subsidiaries and a junior lien on about $58 million of some subsidiaries' real properties that are pledged to secure its credit facility and guaranteed on a subordinated basis to Fleetwood's credit facility by some Fleetwood subsidiaries;

• A coupon of at least 12% consisting of 5% payable in cash, 7% payable in kind and a 50 basis point increase in the PIK interest every six months up to a maximum of 9% PIK interest;

• Fleetwood common stock, the amount of which is dependent on its trading price. In total, the company will issue a minimum of $4 million in stock, with the number of shares determined on a volume-weighted-average basis but subject to a minimum price of $0.75 per share; and

• Accrued interest.

In addition, as an incentive to increase participation in the exchange offer, Fleetwood will implement escalation factors at participation levels of $55 million, $70 million and $85 million.

At each of these levels, the company will provide an increase of about 67 bps in the PIK interest rate, subject to the 9% PIK interest cap, and about $2.2 million in stock, subject to a maximum of $10.5 million at the $0.75 minimum share price.

The exchange offer is scheduled to expire at 5 p.m. ET on Dec. 5 and is subject to several conditions, including a declaration from the Securities and Exchange Commission that the registration statement is effective and a minimum tender threshold of $33.5 million.

A holder of about $33.9 million of the convertibles plans to participate in the exchange offer, the company said, and Fleetwood plans to enter into binding agreements with this holder and one or more other holders.

If the minimum tender condition is satisfied, then the new notes will initially bear interest at a combined rate of 12% and the total value of the shares to be issued will be $4 million, a form S-4 filed with the SEC noted.

The company's secured credit facility has been amended to accommodate the terms of the new senior secured notes. In particular, collateral was freed from the facility to provide security for the notes.

In late August, Fleetwood said it believed it highly likely that holders will put back the convertibles at par and that it was working with investors to replace the convertibles. The company announced plans for the exchange offer on Oct. 21.

The successful completion of the exchange offer will provide Fleetwood further opportunity to stabilize its businesses and strengthen its competitive position during the expected recovery of the markets for its products, according to the Thursday news release.

Barclays Capital Inc. is the dealer manager, Bank of New York Mellon Trust Co., NA is the exchange agent, and MacKenzie Partners (800 322-2885) is the information agent.

NYSE below-criteria letter

Fleetwood also announced that it received formal notification from NYSE Regulation, Inc. that it is not in compliance with the NYSE $1.00 average share price continued listing standard.

The company must return to compliance within six months to avoid delisting.

Fleetwood said it is pursuing various solutions to satisfy the continued listing standard, including successful completion of this exchange offer, the satisfactory resolution in December of any convertible puts and the continuation of ongoing restructuring initiatives to improve operations and further reduce costs.

Fleetwood is based in Riverside, Calif., and produces recreational vehicles and manufactured homes through its subsidiaries.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.