Headwaters holder to exchange $15 million of convertibles for shares

By Susanna Moon

Chicago, July 23 - Headwaters Inc. said it entered into a privately negotiated exchange agreement with a holder of its 16% convertible senior subordinated notes due 2016.

Under the agreement, the holder will exchange $15 million principal amount of the notes and $350,000 of accrued interest for 3.5 million shares of Headwaters common stock.

The exchange represents a 32% discount from the par value of the convertible debt, resulting in an exchange value for Headwaters stock of $4.36 per share.

The actual price per share used for the exchange was the volume-weighted average price on July 20, or $3.14 per share, less a 5% discount. The company's stock (NYSE: HW) closed at $3.02 on July 22.

The parties plan to close the exchange July 24.

Following the exchange, $48.3 million principal amount of the 16% notes will remain outstanding.

"This exchange is an important step in our ongoing efforts to strengthen our balance sheet," Steven G. Stewart, Headwaters chief financial officer, said in a statement. "The $2.4 million reduction in interest expense will improve our 2010 free cash flow."

Headwaters is a South Jordan, Utah-based provider of products, technologies and services to building products, coal combustion products and energy industries.

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