GSI reaches forbearance agreement with 11% noteholders

By Angela McDaniels

Tacoma, Wash., Feb. 11 - GSI Group Inc. entered into forbearance agreements with holders of more than 75% of its outstanding 11% senior notes due 2013 on Friday, according to an 8-K filing with the Securities and Exchange Commission.

The noteholders agreed to not take any action or exercise any remedies in connection with the delayed filing of the company's 10-Q report for the quarter ended Sept. 26 until the earlier of Feb. 27 and the date on which a default or event of default, other than the filing delay, occurs.

The company said it delayed the filing of the 10-Q report after it identified errors related to the timing of revenue recognition from sales to some semiconductor systems segment customers during 2008 and 2007.

The forbearance is conditioned on the company retaining a financial adviser by Feb. 20, the indenture being amended to give holders of at least 25% of the outstanding notes the ability to provide a notice of failure and, if holders of at least 51% of the outstanding notes elect to retain their own financial adviser, the company paying the fees and expenses of that adviser.

As previously reported on Dec. 12, GSI received notices of default from four holders of the notes due to its failure to file the 10-Q report. The company said it did not believe the letters constituted proper notice.

GSI makes precision motion component products, lasers and laser-based manufacturing systems and is based in Bedford, Mass.

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