AGY completes restructuring, offers to exchange remaining old notes

By Caroline Salls

Pittsburgh, June 28 - AGY Holding Corp. and direct parent KAGY Holding Co., Inc. entered into a series of agreements for the restructuring of their business and the exchange of some of AGY's outstanding 11% senior second-lien notes due 2014.

The restructuring is complete, according to a news release.

"We believe that this milestone is the culmination of 18 months of effort to improve our operational capabilities, refine our strategy and create a sound financial platform," interim chief executive officer Richard Jenkins said in the release.

"We are proud of the vote of confidence that has been demonstrated by our financial partners through the extension of these long-term financing arrangements, which we anticipate will fund the execution of our strategic plans."

AGY president Drew Walker said in the release "We believe that this restructuring creates a strong platform for growth in our key aerospace and defense, specialty electronics and industrial markets."

Agreement terms

The agreements include the following terms:

• About 93% in principal amount of the holders of the old notes exchanged those notes for shares of series A convertible participating preferred stock of KAGY and new 11% senior second-lien notes.

The preferred stock will have an initial liquidation preference amount equal to 50% of the principal amount of old notes exchanged plus 50% of the unpaid interest through May 15 on the old notes exchanged.

The new notes will have an extended maturity of Dec. 15, 2016 and a principal amount equal to 50% of the principal amount of old notes exchanged.

In addition, the new notes will be Rule 144A for life. Neither the new notes nor the series A preferred stock will be registered under the Securities Act of 1933.

• The indenture governing the old notes was amended to eliminate substantially all of the covenants and collateral provisions and some events of default applicable to the old notes in connection with the closing of the exchange transaction;

• The companies entered into a second amended and restated master lease agreement with DB Energy Trading LLC, to be syndicated to a group of participants arranged by DB.

The amended agreement extends the term of the lease agreement through June 15, 2016 and allows AGY to lease up to 51,057 Troy ounces of platinum and 3,308 Troy ounces of rhodium, two of the alloy metals used in its manufacturing operations;

• AGY entered into a second amendment to its loan and security agreement with UBS AG, Stamford Branch and UBS Securities LLC under which the maturity of the facility will be no earlier than June 15, 2016 and the applicable margin will be reduced by 25 basis points.

The amended facility is a $60 million senior secured revolving credit facility; and

• The companies entered into a term loan credit agreement with some exchange participants and agent Wells Fargo Bank, NA, providing for borrowings by AGY of $20 million, the full amount of which was drawn in connection with the closing of the exchange transaction.

Interest on the new term loan will be 12%, and the loan will mature on Sept. 15, 2016.

Notes exchange

AGY said it launched an exchange offer for the remaining outstanding old notes following the closing of the restructuring.

The remaining notes will be exchanged under the same terms as in the restructuring transaction.

The exchange offer will expire on July 29.

AGY is an Aiken, S.C.-based producer of fiberglass yarns and high-strength fiberglass reinforcements used in a variety of composites applications.

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