Georgia Gulf amends debt exchange, holders to receive 96% of equity

New York, July 2 - Georgia Gulf Corp. announced a totally revised debt exchange offer under which noteholders could receive up to 96% of its equity.

The deal has been agreed with holders of 77% of its outstanding notes and these investors have entered into lock-up agreements requiring them to tender their notes and deliver consents. Covered by the agreements are holders of 84.6% of the company's $500 million 9½% senior notes due 2014, 79.3% of its $200 million 10¾% senior subordinated notes due 2016 and 34.6% of its $100 million 7 1/8% senior notes due 2013.

Under the terms of the restructuring, Georgia Gulf is offering to exchange all its notes for a total of 32.05 million shares of new convertible preferred stock, which can be converted into common stock on a one-for-one basis, and 1.43 million shares of common stock, after giving effect to a planned one-for-25 reverse stock split.

After the split, Georgia Gulf will have 3 million authorized shares. To allow an increase to 100 million and the issuance of a new equity incentive plan for up to 3.033 million shares, the company will call a special stockholders' meeting to approve changes to its charter. Once the amendments are approved, the convertible preferreds will automatically convert into common stock.

For each $1,000 principal amount of the senior notes, Georgia Gulf is offering 47.30 shares of convertible preferred stock and 2.11 shares of common stock. For the senior subordinated notes, it is offering 18.36 shares of convertible preferred stock and 0.82 shares of common stock.

The exchanges are subject to conditions including that at least 98% of the total outstanding notes are tendered with consents. Georgia Gulf will also need to amend its credit agreement.

In addition, the company's board will be reconstituted, with up to four new directors drawn from a list provided by holders of a majority of the 10¾% notes to replace existing directors. The board size will remain at seven.

Georgia Gulf has entered into forbearance agreements to ensure its notes are not accelerated before July 15. The company added that it will seek further extensions to those agreements.

The exchange offers will expire at midnight ET on July 16.

As of July 1, under the old terms, holders had tendered $1.265 million of the 7 1/8% notes, $7.55 million of the 9½% notes and $150,000 of the 10¾% notes.

At its previous announcement on July 1, Georgia Gulf extended the old offer to midnight ET on July 15 from July 1.

Under those terms, it was offering $250 million principal amount of 15% senior secured second-lien notes due 2014 and 6,922,255 shares of its common stock in exchange for its $100 million of 7 1/8% senior notes due 2013, $500 million of 9½% senior notes due 2014 and $200 million of 10¾% senior subordinated notes due 2016.

The offers began March 31 and were originally scheduled to expire April 27. They have been extended several times.

Holders were to receive $375 principal amount of new notes for every $1,000 principal amount of the 7 1/8% notes and 9½% notes and $125 principal amount of new notes for each $1,000 principal amount of the 10¾% notes.

The offers were subject to the receipt of tenders for at least 95% of the outstanding principal amount of all three issues of old notes.

Forbearance agreements

As reported on June 15, the company extended its forbearance agreements with the holders of the notes.

Under the original agreements, the notes could not be accelerated prior to June 15 in connection with the $34.5 million of interest payments on the 9½% notes and 10¾% notes that were due on April 15 but not paid.

The extended agreements ensure that the notes cannot be accelerated prior to the earlier of July 15 and the first day on which a) holders of at least 25% of any of the three series of notes have the right to accelerate those notes or b) the requisite lenders under the company's senior secured credit agreement have the right to accelerate the debt under the credit facility.

The extended agreements were entered into with holders of more than 84% of the 9½% notes, 79% of the 10¾% notes and 53% of the 7 1/8% notes.

An acceleration under any issue of the notes would constitute a cross default under the company's other note issues and its senior secured credit facility, allowing the holders of that debt to also accelerate.

Georgia Gulf said that if that were to happen, it would have to immediately explore alternatives that could include a potential reorganization or restructuring under the bankruptcy laws.

The company previously received an amendment from its senior secured lenders that will allow it to continue to withhold the interest payments on the 9½% notes and 10¾% notes without causing a default on the bank facility.

Georgia Gulf later received an additional amendment from the senior secured lenders that allows it to withhold interest payments on the 7 1/8% notes.

As a result, the company withheld the $3.6 million of interest that was due June 15 on the 7 1/8% notes. There is a 30-day grace period before the noteholders can seek remedies.

The exchange offers are being made in a private transaction only to holders of old notes in the United States who are "qualified institutional buyers" and holders outside the United States who are persons other than "U.S. persons" as defined under the Securities Act.

Global Bondholder Services Corp. (212 430-3774 or 866 873-7700) is the information agent.

Georgia Gulf is an Atlanta-based maker of chlorovinyls and aromatics chemicals and vinyl-based building and home improvement products.

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