CapitalSource 12¾% holders consent to convertibles buyback using cash

By Susanna Moon

Chicago, Dec. 9 - CapitalSource Inc. said holders approved amending its $300 million of outstanding 12¾% first-priority senior secured notes due 2014 to allow using cash to purchase its convertible debentures redeemable in July 2011 and July 2012.

"The amendment allows us to redeem our outstanding convertible debt with liquidity from our portfolio rather than through an expensive debt or dilutive equity transaction," Donald F. Cole, CapitalSource chief financial officer, said in the release.

"It also provides us with additional flexibility to utilize the significant amount of cash we expect to generate from the continuing liquidation of our parent company loan portfolio to reduce our level of excess capital."

The amendments also modified the calculation of the company's capacity to make restricted payments, increasing it to about $164 million as of Sept. 30.

The amendment also allows the company to obtain secured debt with a minimum advance rate of 40%, rather than the previous 75% requirement, according to a company press release.

Any share repurchases made under the plan will be made through open market purchases or privately negotiated deals from time to time for a period of up to two years.

In order to receive the consent fee of $50.00 per $1,000 principal amount of the notes, holders had to be of record as of 5 p.m. ET on Dec. 1.

Adoption of the proposed amendments required consents from holders of at least a majority of the outstanding notes.

The consent solicitation ended at 5 p.m. ET on Dec. 9.

Goldman Sachs & Co. (attn: liability management group, 800 828-3182 or collect 212 902-5183) was the solicitation agent. U.S. Bank NA (fax 651 495-8158 and for confirmation call 800 934-6802) was the trustee and tabulation agent.

CapitalSource is a Chevy Chase, Md.-based commercial lending, investment and asset management business.

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