Hawk Corp. extends 10¼% '03 notes exchange

Hawk Corp. (B2/B-) said Wednesday (Oct. 2) that it has extended the consent payment deadline on its previously announced tender offer for its 10¼% senior subordinated notes due 2003 and the related solicitation of noteholder consents to proposed changes in the notes' indenture. The consent payment deadline (the deadline by which valid and unrevoked consents must be received in order to be eligible to receive a consent payment) was extended to 5 p.m. ET on Oct. 10, 2002, subject to possible further extension, from the originally announced deadline of 5 p.m. ET on Thursday (Oct. 3) . The consent deadline, as extended, thus coincides with the expiration deadline for the exchange offer.

Banc of America Securities will be the exclusive dealer-manager for the exchange offer and consent solicitation; D.F. King & Co. (banks and brokerage firms should call 212 269-5550; all others should call 800 290-6430) will be the information agent, and HSBC Bank USA will be the exchange agent.

AS PREVIOUSLY ANNOUNCED, Hawk Corp., a Cleveland-based manufacturer of friction products and precision industrial components, said in an S-4 filing with the Securities and Exchange Commission on Aug. 2 that it was beginning an offer to exchange new debt for its $64.725 million of outstanding 10¼% notes and was also soliciting the consent of the noteholders to proposed indenture changes. Hawk said it would exchange the new notes for the existing notes in order to extend the maturity of its debt, although neither the maturity nor the coupon of the proposed new notes was immediately specified in the filing. Hawk said that its domestic subsidiaries would guarantee the payment of interest and principal under the new notes. Hawk also did not formally set an expiration deadline for the offer, nor did it set a deadline for its consent solicitation. It said that the exchange offer and consent solicitation would be subject to the valid tenders of at least a majority of the outstanding notes, and subject to the refinancing of the existing credit facility on terms acceptable to the company and to other customary conditions.

Hawk said that holders tendering their notes would be deemed to have consented to the proposed indenture amendments, which would essentially eliminate all of the restrictive covenants, while holders would have to tender their notes in order to grant consent. It said that holders could withdraw tenders of the outstanding notes at any time before Hawk notifies the trustee for the old notes that it has received valid and unrevoked consents representing a majority of the outstanding notes. Hawk further said that it intends to pay a consent payment for notes tendered by the as-yet-unspecified consent deadline, but it did not specify the amount of that payment in its filing. Any notes which remain outstanding after the expiration of the exchange offer would be subject to the indenture changes, even if the holder did not tender the notes and grant consent.

On Sept. 12, Hawk filed an amendment to its previous S-4 filing, offering specific details about the tender offer for its 10¼% notes and the related consent solicitation. Hawk said that the offer to exchange the new notes for existing notes would expire at 5 p.m. ET on Oct. 10, while the consent solicitation deadline would be 5 p.m. ET on Oct. 3, with both deadlines subject to possible extension.

Hawk said that it would exchange $1,025.63 principal amount of newly issued 12% senior notes due 2006 per $1,000 principal amount of the existing notes; that total consideration figure includes a consent payment of $25.63 principal amount of the new notes per $1,000 principal amount of the existing notes, for consents received by the consent payment deadline. Hawk will also pay all tendering holders accrued and unpaid interest, in cash. It said that besides having a different coupon and maturity date, the new notes would have different interest payment dates and a different optional redemption schedule than the old notes and some additional limitations on Hawk's ability to incur debt. Under certain circumstances, the company said it might be required to pay additional interest, which could be paid in the form of additional new notes. The other terms of the new notes will be substantially the same as the old notes (before giving effect to the proposed amendments to the old indenture).

Pennzoil-Quaker State tenders for outstanding bonds

Pennzoil-Quaker State Co. said Wednesday (Oct. 2) that it has begun tender offers to purchase for cash any or all of several series of outstanding debt securities. In connection with each tender offer, Pennzoil is also soliciting noteholder consents to certain amendments to each of the notes' respective indentures. It is offering to purchase all of the outstanding $100 million of 6 5/8% notes due 2005; the $200 million of 6 ¾% notes due 2009; the $400 million of 7 3/8% debentures due 2029; and the $250 million of 10% Series B senior notes due 2005. Pennzoil said that in addition to the tender offer for its 10% notes, it is providing two additional offers for the holders of those notes, but it said that 10% noteholders may tender their securities under only one of the three offers.

Pennzoil-Quaker State, a Houston-based petroleum products producer which became a wholly owned subsidiary of Shell Oil Co. (the U.S. arm of international energy giant Royal Dutch Shell Group) on Tuesday (Oct. 1), said each of the tender offers as well as the alternative offer and the change-of-control offer for the 10% notes will expire at midnight ET on Oct. 30. It set 5 p.m. ET on Oct. 16 as the consent deadline for each of the offers, by which time notes must have been tendered in order to receive the applicable consent payment as part of the total consideration. All deadlines are subject to possible extension.

Pennzoil will set the total purchase price which it will pay for the notes via a formula based upon a fixed spread over the yield to maturity of the respective reference security for each of the note series being tendered for at 2 p.m. ET on the second business day before the expiration of the tender offers (the tentative pricing date will be Monday, Oct. 28). Pennzoil will determine the price it will pay for the 6 5/8% notes based on a 30-basis point fixed spread over the yield of the 5 7/8% U.S. Treasury Note due Nov. 15, 2005. It will determine the price for the 6¾% notes based on a 35-basis point fixed spread over the yield of the 5½% U.S. Treasury Note due May 15, 2009. It will determine the price for the 7 3/8% debentures based on a 55-basis point fixed spread over the yield of the 5 3/8% U.S. Treasury Note due Feb. 15, 2031. And it will determine the price for the 10% notes based on a 30-basis point fixed spread over the yield on the 5 7/8% U.S. Treasury Note due Nov. 15, 2005. For the 10% notes only, the price will be determined based on the sum of (x) 35% of the equity offering redemption price (equal to 110% of the principal amount of 10% notes validly tendered, and (y) 65% of the fixed spread price for the 10% notes. The total purchase price for each series of notes will include a consent payment of 3% (i.e. $30 per $1,000 principal amount of notes tendered), which will paid only to holders who have tendered their notes by the consent deadline; holders tendering after that deadline will receive the total purchase price minus the consent payment. Pennzoil will also pay accrued and unpaid interest on validly tendered and accepted notes up to - but not including - the settlement date, which is expected to be two business days after the expiration date (tentatively, the settlement date will be Friday, Nov. 1).

Concurrently with each tender offer, Pennzoil is soliciting noteholders' consents to certain amendments to the notes' indenture that will eliminate most of the applicable restrictive covenants. For each series of notes, adoption of the amendments requires the consent of holders of not less than a majority in outstanding principal amount of that series of notes. In the case of the 6 5/8% ONLY, a holder cannot deliver a consent, and therefore cannot tender such 6 5/8% notes unless it either was the registered owner of such 6 5/8% notes as of the close of business on Oct. 1, or unless it obtains a proxy from the registered owner as of that record date. Each tender offer and consent solicitation is conditioned upon, among other things, the receipt of the consent of holders of not less than a majority in outstanding principal amount for the applicable series of notes.

In addition to the tender offer, Pennzoil is offering to purchase for cash any and all of the 10% notes at a price equal to 101% of their par value ($1,010 per $1,000, of the principal amount of 10% notes validly tendered) as a change-of-control offer, as stipulated by the notes' indenture. That change-of-control offer was triggered by the acquisition of Pennzoil by Shell. Consummation of the 10% note change-of-control offer is unconditional.

Pennzoil is also making an alternative offer to the holders of the 10% notes, under which it is offering to purchase for cash any and all of the 10% notes on the 10% note tender offer terms, as outlined above IF the conditions precedent to the completion of the 10% note tender offer ARE satisfied when the offer expires. It said that IF such conditions ARE NOT satisfied at such time, 10% notes tendered pursuant to the 10% note alternative offer will be purchased at the 10% note change-of-control purchase price. Consummation of the 10% note alternative offer is unconditional.

Cede & Co., the nominee of The Depository Trust Co., is the registered holder of all the notes subject to the offers. Beneficial holders wishing to tender their notes must instruct the participant in DTC through which they hold such notes to tender such notes on their behalf. Merrill Lynch & Co. is the exclusive Dealer Manager for the offers and the consent solicitations (call toll-free at 888 ML4-TNDR, or at 212 449-4914). Mellon Investor Services LLC is the information agent (call 888 585-5314; bankers and brokers call collect at 917 320-6286).

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