CONSOLTEX INC. and CONSOLTEX (USA) INC. said Thursday (Jan. 10) that they had begun an exchange offer for the company's outstanding 11% Series B senior subordinated notes due 2003, and a related solicitation of noteholder consents to proposed waivers and indenture amendments. The exchange offer will expire at 5 p.m. ET on Feb. 8, while the consent deadline will be 5 p.m. ET on Jan. 30, both subject to possible extension. Holders of the existing notes are being offered a choice of two packages of new 11% senior subordinated pay-in-kind notes due 2009 and cash. One is for $935 principal amount of the new notes per $1,000 principal amount of the existing notes, plus an additional $55 of the new notes for all the accrued but unpaid interest on the existing notes through the date of the exchange offer. The other is for $573.63 principal amount of new notes plus $46.38 in cash per $1,000 principal amount of the existing notes, plus $33.74 principal amount of the new notes for the accrued and unpaid interest on the existing notes. Interest on the new notes will be payable either in cash or in additional notes, at the company's option, starting with the April 1 payment and continuing through April 1, 2005, and will be payable in cash after that. Consoltex Inc., a Quebec, Canada-based textile and packaging company, and Consoltex (USA), based in New York, are subsidiaries of Consoltex Holdings Inc., which in turn is wholly owned by AIP/CGI Inc., which also holds 28.875%of the outstanding existing notes. The exchange offer is subject to conditions, including the tender of at least 95% of the notes not held by AIP/CGI by the expiration date, and the delivery of consents to the proposed indenture amendments and waivers by the holders of at least a majority of the non-AIP/CGI notes by the consent deadline. If the minimum tender is received and certain other conditions are satisfied or waived, AIP/CGI has agreed to contribute its existing notes to Consoltex Holdings, which will in turn contribute the notes to Consoltex Inc. and Consoltex (USA), in exchange for Consoltex common shares and contributed surplus of Consoltex (USA). Such a transaction would take place promptly after the expiration deadline. Consoltex further said that in December, it entered into agreements with the holders of 70.83% of the existing outstanding notes not held by AIP/CGI, under which the company agreed to begin the tender offer and consent solicitation, and those noteholders agreed to tender their notes and deliver the required consents. The proposed waivers the noteholders are being asked to agree to would waive all defaults under the existing indenture, including Consoltex's default for failure to make the Oct. 1 interest payment on the notes, and for failure to file a quarterly report with the Securities and Exchange Commission for the quarter ended Sept. 30, 2001. The proposed amendments would eliminate substantially all of the restrictive covenants in the existing indenture and would release the subsidiary and parent guarantees of the existing notes. If the exchange offer and consent solicitation are completed, any existing notes not tendered for exchange will not be affected by the payment default waiver, but will be subject to the reporting default waiver and the proposed amendments. Holders who tender their notes under the offer are automatically deemed to have also delivered their consents to the proposed waivers and indenture changes, and vice versa. A previously delivered consent may be revoked only by withdrawing the tender of the related existing notes under terms of the tender offer. Existing notes tendered prior to the consent deadline may be withdrawn (and the related consent therefore revoked) at any time up to the consent deadline, but not afterward. Existing notes tendered after the consent deadline may be withdrawn (and the related Consent therefore revoked) at any time prior to the expiration of the exchange offer. Consoltex's obligation to accept for exchange any validly tendered existing notes is subject to, among other customary conditions, the receipt of the minimum tender and the minimum consent, the execution and delivery by the issuers and other relevant parties of a supplemental indenture putting into effect the proposed waivers and amendments, and the Proposed New Credit Facility. The exchange agent for the exchange offer and consent solicitation is U.S. Bank, NA.

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