NCI Building in talks with private equity firm about an investment

By Angela McDaniels

Tacoma, Wash., May 21 - NCI Building Systems, Inc. said it is in advanced stages of negotiations with a private equity firm about a "substantial" equity investment in the company.

The talks are part of the company's exploration of alternatives to strengthen its balance sheet and enhance its long-term financial position, according to a company news release.

The company warned that any transaction will require "considerable" cooperation from its lenders and convertible noteholders and will be subject to closing conditions, including the refinancing of the existing credit facilities and a recapitalization or redemption of the convertibles.

"Despite the challenges presented by the economy and the credit markets, I am confident that we will finalize a transaction, enabling us to have sufficient liquidity to grow our business as the economy rebounds," chairman, president and chief executive officer Norman C. Chambers said in the release.

"While this investment will be very dilutive to our current shareholders, we believe it is in their best interest to address our capital structure."

The company obtained a waiver from its senior credit facility lenders that waives restrictions on its ability to enter into an agreement for the equity investment and waives its financial maintenance covenants.

The waivers will remain in effect through July 15 and automatically extend to Sept. 15 if a definitive agreement for an equity investment is signed.

In March, NCI said it will not be allowed to repurchase its convertibles that have a put right in November if its revolving credit facility, which matures in June, is not renewed.

Failure to pay on the convertibles would cause the company to be in default under both the notes and the senior secured credit facility and could result in all $473 million of debt outstanding under the agreements to be declared immediately due and payable. NCI said that absent a refinancing, it would be unable to repay this debt.

NCI Building Systems is a Houston-based integrated manufacturer of metal products for the nonresidential building industry.

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