DeCrane in talks with further holders of 12% senior subordinated notes

By Jeff Pines

Washington, July 21 - DeCrane Aircraft Holdings Inc. said it is talking with holders of its 12% notes not participating in the previously reported swap for 17% senior discount notes. It reported the talks in a Wednesday filing with the Securities and Exchange Commission.

The company wants to offer them new 12% notes that would pay interest at a rate of 2% in cash and 10% in kind. It does not have any letters of intent or definitive agreements.

The company, a subsidiary of DeCrane Holdings Co., has previously reported agreements with several holders of $65 million of its 12% notes willing to swap them for 17% senior discount notes. It said it now has all of the third party consents and expects to complete the deal in the near future.

The new 17% notes are identical to the existing notes, except for changes in interest payments, ranking, and tighter covenants limiting incurrence of debt, granting of liens and making of restricted payments, DeCrane said in a previous 8-K filing with the Securities and Exchange Commission.

It has also entered into non-binding letters of intent with the holders of all its 16% senior preferred stock to amend the terms of the preferreds.

Parent company DeCrane Holdings has also entered into a similar agreement with the holders of substantially all of its 14% preferred stock.

Under the agreements, the preferreds will be amended so that dividends will not be payable unless the company achieves a leverage ratio between 6-to-1 and 5-to-1, in which case they will be payable at 4% on the 16% preferred stock and 3.5% on the 14% preferred stock. If the leverage ratio is lower than 5-to-1, then dividends will accrue at the original rates of 16% and 14%. In both cases dividends will not be payable until redemption.

The redemption date for the 16% preferreds is shortened to Dec. 31, 2008 from March 31, 2009. The redemption date for the 14% preferreds is unchanged at Sept. 30, 2009.

The amendments also add several restrictive covenants and further limit restricted payments.

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