Spectrum Brands solicits consents for 12% subordinated toggle notes

By Jennifer Chiou

New York, March 1 - Spectrum Brands Inc. announced a consent solicitation for its 12% senior subordinated toggle notes due 2019 to amend certain definitions in the indenture.

The company previously said on Feb. 10 that it may be required to make an offer for the notes should it complete its previously announced merger with Russell Hobbs Inc.

The proposed amendments are in connection with the plan of merger among Spectrum, Russell Hobbs, SB/RH Holdings, Inc., Battery Merger Corp. and Grill Merger Corp.

Adoption of the proposed amendments is not a condition of the merger.

Spectrum is seeking consents from holders of a majority of notes prior to 5 p.m. ET on March 9, the consent deadline.

For each $1,000 principal amount, holders will receive a $20.00 consent payment in cash.

The company already announced plans to get a new $1.05 billion credit facility as well as the issue of $750 million of senior secured notes due in 2017 in connection with the merger.

As already reported, if the company had tendered for the notes, it would purchase them at 101% of face value.

Under the merger agreement, current shareholders of Spectrum Brands will receive one share in the new combined company for each share they hold. Furthermore, as part of the transaction, Harbinger has agreed to convert its existing about $158 million of Russell Hobbs' term debt and $207 million of Russell Hobbs' preferred stock into common stock of the new company at a price of $31.50 per share. Following the closing of the transaction Harbinger is expected to own 63.7% of the combined entity.

As already noted, the all-stock transaction values Spectrum Brands at an enterprise value of $2.6 billion, or $965 million net of debt, which equates to $31.50 per share net of outstanding debt, and privately held Russell Hobbs at an enterprise value of $675 million, or $661 million net of debt.

The combined company, which will operate under the Spectrum Brands name, is expected to deliver about $3 billion in annual revenues with $430 million to $440 million of adjusted EBITDA in fiscal 2010.

The deal is expected to close in the summer of 2010 and is subject to approval by holders of a majority of Spectrum Brands' common stock not owned by Harbinger, a 45-day go-shop period, closing of the new financing and other customary conditions.

Credit Suisse Securities (USA) LLC is the (212 538-1862). Global Bondholder Services Corp. is the information agent (866 873-6300 or call collect 212 430-3774). U.S. Bank NA is the trustee.

Spectrum Brands is an Atlanta-based consumer products company. Russell Hobbs is a Miramar, Fla.-based marketer and distributor of branded small household appliances.

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