Quality Distribution subsidiaries settle offers for 9% notes, floaters

By Angela McDaniels

Tacoma, Wash., Oct. 15 - Quality Distribution, Inc. announced the successful completion of the tender offer and exchange offers made by subsidiaries Quality Distribution, LLC and QD Capital Corp. for their $99,761,000 of 9% senior subordinated notes due 2010, $85 million of floating-rate senior notes due 2012, series A, and $50 million of floating-rate senior notes due 2012, series B.

As previously reported, the subsidiaries received tenders for $218.2 million principal amount of notes in the offers.

The offers extended the company's debt maturity profile to mid-2013 and leave Quality Distribution with $50 million of available liquidity for business opportunities, said chief executive officer Gary Enzor in a company news release.

The subsidiaries began a retail tender offer for the 9% notes, a private exchange offer for the 9% notes and a private exchange offer for the floating-rate notes on Aug. 31. Each offer expired at midnight ET on Oct. 13.

Holders tendered approximately:

• $100,000 principal amount of 9% notes into the retail tender offer;

• $83.6 million principal amount, or 83.8%, of the 9% notes into the exchange offer, of which approximately $2.9 million were held by holders that elected the cash option;

• Approximately $84.5 million principal amount, or 99.4%, of the series A notes; and

• Approximately $50 million principal, or 100%, of the series B notes.

Payment

For each $1,000 principal amount of 9% notes tendered in the retail tender offer, the subsidiaries paid $600 for notes received by the early tender date and $500 for notes received after that time but before the offer expiration.

The early tender date for the retail tender offer was 5 p.m. ET on Sept. 11.

In the private exchange offers, the subsidiaries issued new 10% senior notes due 2013 in exchange for both series of floating-rate notes and new 11¾% senior subordinated pay-in-kind notes due 2013 or cash for the 9% notes. Of the 11¾% coupon, 9% is payable in cash and the remainder is payable in kind.

For each $1,000 principal amount, holders of floating-rate notes received $1,000 principal amount of new 10% notes for notes tendered by the early date and $900 principal amount of new 10% notes for notes tendered after that time.

For each $1,000 principal amount of 9% notes, holders received either a) $1,000 principal amount of new 11¾% PIK notes plus 21.71 warrants or b) $600 in cash. The exercise price of the warrants is $0.01 per share.

Holders of the floating-rate notes received accrued interest up to but excluding the settlement date, which was Oct. 15.

Holders of 9% notes who elected the cash option received accrued interest up to but excluding the settlement date.

Holders of 9% notes who elected the note-only option did not receive any payment on the settlement date for accrued interest. Instead, on Nov. 15 - the next scheduled interest payment for the 9% notes - these holders will receive a special interest payment on their new notes in cash in the amount of accrued interest up to the settlement date with respect to an equivalent principal amount of 9% notes.

Previously, the company said the subsidiaries expected to issue about $134.5 million principal amount of 10% notes, about $80.7 million principal amount of 11¾% PIK notes and about 1.75 million warrants and to pay approximately $1.9 million in cash, including accrued interest.

New notes

Quality Distribution said the new 10% notes and 11¾% PIK notes have substantially the same terms as the floating-rate notes and 9% notes, respectively, but are not fungible with or exchangeable for those notes.

The new notes are guaranteed by Quality Distribution and each of its material U.S. restricted subsidiaries, but they are not guaranteed by the company's foreign subsidiaries or its unrestricted subsidiaries.

Consent solicitation

The subsidiaries were also soliciting consents to proposed amendments that would eliminate or waive substantially all of the restrictive covenants, eliminate some events of default, modify covenants regarding mergers and consolidations and modify or eliminate some additional provisions.

Holders who tendered into an exchange offer were required to deliver consents and vice versa.

Quality Distribution said the amount of consents received was enough to adopt the proposed amendments.

The exchange offers were made only to qualified institutional buyers and accredited investors and to certain non-U.S. investors located outside the United States.

The retail tender offer was made only to persons who were not eligible to participate in the exchange offers.

Quality Distribution provides bulk transportation and related services and is based in Tampa, Fla.

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