Haights Cross Communications extends exchange offer for 12½% notes

By Angela McDaniels

New York, Aug. 17 - Haights Cross Communications, Inc. said it extended the private exchange offer and consent solicitation for its 12½% senior discount notes due 2011 to 11:59 p.m. ET on Aug. 21 from Aug. 14.

The offer began in June. It was originally scheduled to expire July 6 and has been extended multiple times.

As previously reported, the company missed the coupon payment of about $8.4 million that was due on Aug. 3 and is taking advantage of the 30-day grace period for the missed payment.

Similarly, Haights Cross said it plans to use the 30-day grace period for the semiannual interest payment on its 11¾% senior notes due 2011. That payment was due Aug. 17.

The company previously announced talks with holders of the 11¾% notes to discuss alternative restructuring plans should the offer fail or otherwise not be completed. Restructuring plans include the possibility of a Chapter 11 case and plan of reorganization.

Haights Cross' forbearance agreement and credit agreement for its senior secured term loan prohibits it from making interest payments on the notes while the company remains in default under the credit agreement. The company is seeking to extend the forbearance, which was set to expire Aug. 17.

The cure of the default will require, among other things, the successful completion of the exchange offer.

As of the close of business on Aug. 14, investors had tendered $100 million, or 74%, of the notes. The figure is unchanged from July 13.

Under the exchange offer, the company plans to issue 120.21 shares of common stock for each $1,000 principal amount at maturity of notes exchanged, or a total of 16.23 million shares if all $135 million principal amount at maturity of notes are exchanged.

Haights Cross said these shares would represent at least 89% of the outstanding shares of common stock of the company immediately after the closing of the exchange offer.

Immediately before the exchange offer closing, the company would effect a one-for-five reverse stock split, which would convert holdings of currently outstanding shares and warrants to purchase shares of common stock into about 2.01 million shares, or 11% of the outstanding shares immediately after closing, assuming 100% of the notes are exchanged.

Affiliates of Monarch Alternative Capital, LP, which are Haights Cross stockholders and holders of roughly 33% of the outstanding notes, have agreed to support this restructuring.

Covenant changes

Along with the exchange offer, Haights Cross is soliciting consents from eligible noteholders to amend the notes indenture to eliminate or substantially modify all of the restrictive covenants and change some of the events of default and other provisions.

Eligible holders who tender notes under the exchange offer must also consent to the amendments, and the amendments will not take effect until the exchange offer is completed.

Restructuring plan

The company said the exchange offer and consent solicitation are part of a restructuring plan that includes an amendment to its credit agreement and related transactions, under which Haights Cross would no longer be in default under the credit agreement.

Haights Cross said it will also offer to issue five-year warrants to purchase 1.48 million shares of common stock to its existing stockholders at an exercise price of $7.40 per share as part of the overall restructuring.

These shares would represent about 7.5% of Haights Cross' outstanding shares and warrants if all the notes are exchanged.

Exchange conditions

The completion of the exchange offer is subject to the valid tender of at least 90%, down from 95% originally, of the total principal amount at maturity of outstanding notes, the execution of the credit facility amendment and holders of a majority of the outstanding shares of common stock consenting to an amendment to the company's certificate of incorporation to adopt the reverse stock split, an increase in Haights Cross' authorized shares of common stock and to adopt cumulative voting for the election of directors.

The company already said beneficial holders of a majority of its outstanding common stock have agreed to the certificate of incorporation amendments and have also agreed to terminate the operative provisions of the existing stockholders agreement so there will be no further agreements regarding the election of directors or participation in future offerings following the closing of the exchange offer.

Haights Cross is a White Plains, N.Y.-based educational and library publisher.

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