GSI Group agrees new plan with noteholders, equity stake up to 41.1%

New York, March 12 - GSI Group Inc. said it was reached an agreement in principal with holders of more than 88% of its 11% senior notes due 2013. The holders account for more than 70% of investors by number.

Under the proposed changes to the plan of reorganization, existing equity holders will now receive 41.1% of the restructured company's stock, up from 18.6% previously.

In addition, equity holders will receive three-year warrants for 10% of 110% of the company's post bankruptcy shares, with a strike price of $2.50. Previously the warrants were to have been split into two series, each for 10% of 110% of the stock, with strike prices of $1.10 and $2.00.

The noteholders have agreed to reduce their claims to the right to receive new convertible preferred stock which would convert into 53.8% of the equity. Previously they would have received shares for 74.3% of the equity.

The new preferreds will be mandatorily rtedeemable after eight years for cash or, in certain circumstances, stock.

In addition, the noteholders will receive $110 million of new secured notes, up from $95 million previously.

The changes also reduce recovery for subsidiary GSI Group Ltd.'s unsecured note to the right to receive preferred shares convertible for 5.1% of the outstanding shares. Previously the note would have had the right to receive 7.1% of the stock.

"We are very pleased to have reached an agreement with the noteholders which would provide the company's existing shareholders with an increased recovery to reflect what the company believes are improvements to market conditions," said Sergio Edelstein, GSI's chief executive officer, in a news release.

"At the same time, we continue to believe that this agreement will allow the company to substantially reduce its debt and put us in a stronger, financially healthier position for the future. The company remains operationally strong with ample cash on hand to meet its operational needs and we hope that the proposed modifications will entice all stakeholders to support the plan as modified and work with the company towards plan confirmation and emergence."

Bedford, Mass.-based GSI makes precision motion component products, lasers and laser-based manufacturing systems. The company filed for bankruptcy on Nov. 20. Its Chapter 11 case number is 09-14109.

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