WCI offers 17½% notes, warrants in exchange for 4% convertibles due 2023

By Susanna Moon

Chicago, July 22 - WCI Communities, Inc. said it sweetened the exchange offer for all of its outstanding $125 million 4% contingent convertible senior subordinated notes due 2023.

For each $1,000 principal amount convertibles, the company said it will now offer a unit consisting of $1,000 principal amount of new 17½% senior secured notes due 2012 and a warrant to purchase 33.7392 shares of its common stock.

WCI originally said it would exchange its convertibles for 16% senior secured notes due 2013.

The exchange offer will expire at midnight ET on Aug. 4. It began on July 8.

Bank of New York Mellon Trust Co., NA (212 815-3687 or fax 212 298-1915; attn: David Mauer) is the exchange agent.

The completion of the exchange offer requires a 90% minimum tender condition, which means that at least 90% of the principal amount of outstanding notes must be tendered.

The offer also is conditioned on the amendment and restatement of the company's existing credit facilities and issuance of new second-lien notes.

On July 16, WCI said in a T-3 filing with the Securities and Exchange Commission that it was looking to amend its revolving credit facility and term loan.

Under the revolver amendment, about $243.3 million will cease to be available and will be payable in full on the revolver's maturity date of June 11, 2010.

The revolver will have $150 million of availability, and up to $100 million of that amount will be available for letters of credit.

Under the term loan amendment, about $132.3 million will remain outstanding, which will mature and be payable in full on Dec. 23, 2010.

Pricing and fees on the revolver and the term loan are expected to increase with the amendment. Currently, the revolver and the term loan are both priced at Libor plus 525 basis points. The revolver currently has a 25 bps unused fee.

Financial covenants under the amended revolver and term loan are expected to include a minimum ratio of appraised asset value to loans of 2.0 to 1.0. In addition, at least one of the following tests will have to be satisfied: minimum ratio of EBITDA to fixed charges of 0.5 to 1.0, minimum ratio of cash flow from operations to cash interest expense of 1.0 to 1.0 or minimum liquidity of $50 million.

The company is in discussions with the agent for the lenders of the revolver and term loan, but an amendment agreement is subject to the negotiation of satisfactory documentation, including intercreditor agreements with the second- and third-lien lenders, as well as to the receipt of lender consents.

WCI is a Bonita Springs, Fla.-based homebuilding and real estate services company.

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