Headwaters to exchange $49.79 million 2.5% convertibles for new notes

By Angela McDaniels

Tacoma, Wash., May 9 - Headwaters Inc. will issue new convertible notes and cash in exchange for $49,791,000 of its 2.5% convertible senior subordinated notes due 2014 under privately negotiated exchange agreements reached with some holders, according to an 8-K filing with the Securities and Exchange Commission.

For each $1,000 principal amount of old convertibles exchanged, holders will receive an equal principal amount of new 8.75% convertible senior subordinated notes due Feb. 1, 2016 and $11.70 of cash.

Chief executive officer Kirk Benson will be exchanging $1.15 million of old convertibles on the same terms as the other holders.

The new notes will be convertible at any time beginning Dec. 1, 2015 and prior to that only if certain events occur. The old notes are convertible at any time beginning Dec. 1, 2013 and prior to that only if certain events occur.

The conversion rate is the same for both series of convertibles: 33.9236 shares of common stock per $1,000 principal amount of convertibles, which is equivalent to a conversion price of $29.478 per share.

If a fundamental changes occurs, in certain circumstances there will be an increase in the conversion rate for holders who elect to convert their notes in connection with the fundamental change. The additional number of shares will be based on the closing price of Headwaters' common stock on the effective date of the fundamental change, which is not true of the old convertibles. No adjustment will be made if the common stock price on the effective date is greater than $75.00 or less than $10.00, and in no event will the shares issuable upon such conversion exceed 100 per note.

The exchange is subject to some conditions that include the effectiveness of the company's application for qualification on form T-3 filed with the SEC on May 4.

Wells Fargo Bank, NA is the trustee of the new convertibles. Wilmington Trust FSB is the trustee of the old convertibles.

Headwaters makes light building materials and heavy construction materials and is based in South Jordan, Utah.

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