Foster Wheeler again extends debt exchange, preferred threshold still not met

New York, Sept. 17 - Foster Wheeler Ltd. again extended its equity-for-debt exchange, saying the participation threshold for its 9% preferred securities had still not been met.

So far 57.5% of the preferreds has been tendered, up from 49.3% on Sept. 14 and 48.7% on Sept. 10 but still short of the 60% threshold.

"Unless the tendered amount of Preferred Securities meets or exceeds an acceptable minimum threshold, this exchange offer will fail," said Raymond J. Milchovich, chairman, president and chief executive officer, in a news release.

"Especially given that we have exceeded the minimum thresholds regarding every other class of securities involved in our exchange offer, it would be a shame if all our stakeholders were forced to suffer because of a small shortfall in the preferred securities."

The offer now expires at 5 p.m. ET Sept. 21 instead of 5 p.m. ET on Sept. 17.

On Sept. 2 the company cut the required threshold for the preferreds to 60% from 75%.

Foster Wheeler also recalculated the interest rate on the new notes it will offer in its equity-for-debt exchange, fixing it at 10.359%. The figure, which assumes an expiration date of Sept. 21, was set as 665 basis points over the yield on the U.S. Treasury note having the same maturity as the new notes.

As of 5 p.m. ET on Sept. 17, holders had tendered $100.697 million or 57.5% of the 9% preferreds, $209.930 million or 99.97% of the 6½% convertible subordinated notes, $56.643 million or 73.4% of the Robbins series C bonds due 2024, $12.028 million or 99.2% of the Robbins series C bonds due 2009, $35.489 million principal amount at maturity or 99.1% of the Robbins series D bonds and $191.118 million or 95.6% of the 6¾% notes.

Those were all unchanged from the last report as of 5 p.m. ET on Sept. 10 apart from the figure for the preferreds, which rose from $86.282 million, and the 6¾% notes, which fell $1 million.

Completion of the exchange is subject to tenders of at least 60% (down from 75%) of the trust securities, 90% of the convertible notes, 90% of the series C Robbins bonds and series D Robbins bonds, 20% of the 2024 series C Robbins bonds and 90% of the 2005 notes.

Under terms of the exchange offer, as revised on July 1:

* Holders of the 9% preferred securities issued by FW Preferred Capital Trust I will receive 0.760 common shares, 0.0123 preferred shares and one warrant to purchase common shares for each trust security with a liquidation amount of $25. No accumulated dividends will be paid;

* Holders of the 6.5% convertible subordinated notes due 2007 will receive 160.600 common shares and 1.517 preferred shares plus accrued interest through the date of the exchange for each $1,000 principal amount;

* Holders of the series C Robbins bonds maturing in 2009 will receive 192.900 common shares and 1.817 preferred shares plus accrued interest through the date of the exchange for each $1,000 principal amount;

* Holders of the series C Robbins bonds due 2024 will receive 160.600 common shares and 1.517 preferred shares plus accrued interest through the date of the exchange for each $1,000 principal amount;

* Holders of the series D Robbins bonds will receive 192.900 common shares and 1.817 preferred shares for each $1,000 accreted principal amount as of June 25;

* Holders of the $200 million principal amount of 6¾% senior notes due 2005 will receive for each $1,000 principal amount: $750 principal amount of fixed-rate senior secured notes due 2011 series A, 46.100 common shares and 0.437 preferred shares plus accrued interest through the date of exchange for a total of up to 9.22 million common shares, up to 87,400 preferred shares and up to $150 million principal amount of new notes. The interest rate on the new notes will be fixed two days before the expiration using a 665 basis point spread over a reference Treasury.

The new preferred shares will be convertible into 1,300 common shares once shareholders approve an increase in the number of authorized shares.

At the minimum required participation levels, the amended exchange will cut Foster Wheeler's existing debt by $410 million, extend the maturities on $135 million of debt to 2011, reduce interest expense by $22 million per year and, when combined with the sale of new notes to retire funded bank debt, eliminate substantially all material scheduled corporate debt maturities before 2011.

At the minimum participation levels and excluding the effect of the warrants, holders of Foster Wheeler's current common stock would end up with 5.1% of the voting equity securities. Holders of the 6¾% senior notes due 2005 will receive 13.8% of the voting equity securities, holders of the series C Robbins bonds due 2009 will receive 3.5% of the voting equity securities, holders of the series C Robbins bonds due 2024 will receive 4.1% of the voting equity securities, holders of the 6.5% convertible subordinated notes due 2007 will receive 50.4% of the voting equity securities and holders of the 9% trust preferred securities will receive 11% of the voting equity securities. A further 4.9% of the voting equity securities will be reserved for grants to management.

Holders of the trust preferreds will be issued five-year warrants for 15% of the company's fully diluted equity, and holders of the common stock outstanding before closing of the exchange will receive a dividend in the form of three-year warrants for 5% of the company's fully diluted equity. Three-year stock options for 5% of the company's fully diluted equity will be reserved for management. The calculations are based on the minimum level of participation in the exchange.

As previously announced, Foster Wheeler has also obtained a commitment from a group of institutional holders of its debt securities to purchase $120 million of new senior secured notes due 2011. Proceeds will be used to repay the term loan and revolving debt outstanding under its existing senior secured credit agreement.

After closing of the exchange, the company said it intends to seek a new multi-year revolving credit agreement and letter-of-credit facility.

Rothschild Inc. is dealer manager for the exchange (212 403-3784).

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