LSB Industries seeks to amend 7¾% notes for redemptions via asset sale

By Susanna Moon

Chicago, Aug. 23 – LSB Industries, Inc. is soliciting consents to amend its $425 million principal amount of 7¾% senior secured notes due 2019 to allow for some planned redemptions using proceeds of an asset sale.

Specifically, the company is asking to redeem the following:

• $50 million principal amount of outstanding 12% senior secured notes due 2019 at a redemption price of 106%;

• $50 million principal amount of the 7¾% notes at 103.875%; and

• Up to $45 million liquidation preference of series E cumulative redeemable class C preferred stock, in addition to any redemption that may be made using the full $35 million of restricted payment capacity that the company has under the existing general restricted payments basket in the indenture for an aggregate total of $80 million.

LSB also is asking to waive its obligation to make an asset sale repurchase offer for the notes and to make technical changes to financial definitions and collateral release mechanics, according to a company announcement.

In return, if the proposed amendment becomes operative, the coupon on the 7¾% notes outstanding after the redemption will rise to 8½%, retroactively from Aug. 1.

The company said it will agree to complete the redemptions “as promptly as practicable” after the notes are amended and also to prohibitions on its ability to incur future pari passu debt of more than $25 million principal amount at any time using the general debt basket and the general liens basket under the indenture.

The solicitation will remain open until 5 p.m. ET on Sept. 2. The record date is 5 p.m. ET on Aug. 22.

The consent fee will be $13.25 per $1,000 principal amount, which was calculated based on an assumed consent fee of $15.00 per $1,000 principal amount if the redemption had occurred prior to the payment of the consent fee, the company said.

To amend the notes, the company must secure the consents from holders of a majority of the outstanding notes.

If the company receives the needed consents, the company will enter into a supplemental indenture that will become operative when the consent fee is paid.

The company said the planned redemptions would result in deleveraging its assets and enhancing its long-term prospects by improving its capital structure given the cost of capital associated with the 12% notes and the preferred stock.

The company closed the sale of its climate control business for a total sale price of $364 million on July 1.

Ipreo LLC (212 849-3880 or 888 593-9546) is the tabulation agent and information agent. Credit Suisse Securities (USA) LLC (212 325-2476 or 800 820-1653) is the solicitation agent.

LSB is a manufacturing, marketing and engineering company based in Oklahoma City.

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