Elgar Holdings to launch exchange to restructure 9 7/8% notes, may file Chapter 11 if not successful

By Peter Heap

New York, May 13 - Elgar Holdings, Inc. said it expects to launch an exchange offer on May 15 for its $90 million outstanding 9 7/8% senior notes.

The exchange is part of an agreement with investors to raise new capital, according to a filing with the Securities and Exchange Commission.

If the exchange is not successful, Elgar Holdings said it may file for Chapter 11.

Holders of the senior notes will be offered $60 million of 9% senior notes due Feb. 1, 2008, $30 million liquidation value of series D 10.5% senior cumulative redeemable preferred stock due Feb. 1, 2008 and 750,000 shares of new common stock, or 75% of the outstanding equity on completion of the restructuring transactions.

Elgar Holdings also expects that it may offer holders the option of having their notes repurchased by the company for an amount of cash to be determined.

The exchange is expected to be launched on May 15, according to the SEC filing, although it adds that the date may be changed.

In connection with the exchange, Elgar Holdings will solicit consents from tendering noteholders to approve modifications to the note indenture that will remove many of the protections.

It will also ask them to support a prepackaged bankruptcy if the exchange offer is not completed. The prepackaged bankruptcy would seek to replicate the exchange as far as possible except for the possible cash repurchase of the senior notes.

The exchange is part of an agreement made on April 16 with J.F. Lehman Equity Investors I, LP, Jackson National Life Insurance Co., Old Hickory Fund I, LLC, Indosuez Electronics Partners and OCM/GFI Power Opportunities Fund, LP and OCM Principal Opportunities Fund II, LP, funds managed by Oaktree. Between them these investors hold 73% of the outstanding senior notes. The Oaktree funds and J.F. Lehman Equity Investors I will not participate in the cash repurchase option.

Under the agreement, J.F. Lehman Equity Investors I will also invest at least $4.8 million in the company in return for which it will receive $6.4 million of the new senior notes, $3.2 million of the new preferred stock and 80,000 shares. The investment could go as high as $6 million with the amount of securities increase proportionately.

Elgar Holdings existing series A preferred stock will be converted into $3.5 million of new preferred stock and 125,000 shares of common stock.

The existing common stock and series B and series C convertible preferred stock will be converted into 125,000 shares of common stock.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.