K2 seeking new $225 million credit facility via Bank One

By Sara Rosenberg

New York Feb. 27 - K2 Inc. has entered into a letter of intent with Bank One for a $160 million credit facility. However, the company intends to increase the facility to $225 million to accommodate the working capital requirements of Rawlings Sporting Goods Co. Inc., which K2 is to acquire, according to a filing with the Securities and Exchange Commission.

The facility is expected to have a term of three years.

Security will be all of the assets of K2 and its domestic subsidiaries, including the assets of Rawlings following the merger, as well as the stock of certain of K2's foreign subsidiaries, according to the filing.

Proceeds from the facility will be used to refinance existing indebtedness, including the existing bank debt of Rawlings following the merger, to fund future acquisitions and for general working capital purposes.

Under the terms of the merger agreement, Rawlings will become a wholly owned subsidiary of K2. Each outstanding share of Rawlings common stock will be converted into 0.950 of a share of K2 common stock.

Although the company anticipates obtaining the new credit facility prior to the completion of the merger, the bank loan is not a condition to the closing of the merger. If K2 does not successfully complete the credit facility, then the company would need consent from lenders under the existing bank facility in order to complete the merger.

K2 is a Los Angeles consumer products company with a primary focus on sporting goods and other recreational products.

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