U.S. Industries amends, extends offer for 7 1/8% '03 notes; makes offer for 7¼% '06 notes

U.S. Industries, Inc. said on Friday (Oct. 4) that its previously announced offer to exchange cash and new notes for all of its outstanding 7 1/8% senior notes due 2003, and the related solicitation of noteholder consents to proposed indenture changes, has been extended until midnight ET on Nov. 1, subject to possible further extension, from the previous Oct. 4 deadline. The consent deadline was extended to midnight ET on the later of Oct. 18 or the date on which holders of a majority of the outstanding 7 1/8% notes deliver their consents to the proposed indenture amendment.

The company also said that it has amended the terms of the offer, raising the interest rates on the new notes it is offering to 11¼% from the originally announced 9 1/8%. It also said that the supplemental indenture which will be executed will provide that (1) USI will redeem the new notes at par to the extent the balance allocable to the new notes in the cash collateral account equals or exceeds 10% of the outstanding principal amount; (2) USI may redeem the new notes at par with the cash in the cash collateral account at any time; and (3) the new notes will be redeemable at the discretion of USI at the following percentages of the principal amount redeemed:

-- 103% until the first anniversary of the date the notes are issued

-- 102% until December 31, 2004

-- 101% thereafter until maturity

The indenture will also be amended to permit payment of the consideration in this and future exchange or tender offers.

U.S. Industries raised the cash consent payment to be paid to holders who validly deliver consent to the indenture amendments by tendering by the consent deadline to 1.5% of the principal amount of the new notes issued to them in exchange for the existing 7 1/8% notes at the consummation of the exchange offer. Holders who do not deliver their consents by the consent date will not receive the consent payment. As of Thursday (Oct. 3), approximately $6.11 million of the $250 million outstanding principal amount of the existing notes had been deposited with the depositary for exchange. Under terms of the exchange offer, holders may withdraw their tenders of the existing notes and revoke their consents prior to the consent deadline, but not afterward.

USI further said that it also intends to make a tender offer to purchase at par its outstanding 7¼% senior notes due 2006 in an aggregate principal amount equal to the balance in the cash collateral account allocable to those notes. USI will simultaneously make a related consent solicitation to amend the applicable indenture to allow USI to pay the tender offer consideration to tendering holders from the cash collateral account on a pro rata basis, based on the amount of notes tendered relative to the outstanding amount of notes, and to provide that USI will make future offers to purchase 7¼% notes with cash from the cash collateral account when the balance allocable to those notes equals or exceeds 10% of the outstanding notes. The tender offer for the 7¼% notes will be conditioned upon the consummation of the exchange offer for the 7 1/8% notes, among other conditions.

Georgeson Shareholder Communications Inc. is the information agent for the exchange offer and consent solicitation (banks and brokers should call collect at 212-440-9800; all others should call toll- free at 866 807-2995).

AS PREVIOUSLY ANNOUNCED, U. S. Industries, Inc., a West Palm Beach, Fla.-based company which makes and markets branded bath and plumbing products, as well as vacuum cleaners for the consumer market, said on Sept. 9 that it has begun an offer to exchange cash and new debt with a higher interest rate and longer maturity for all of its $250 million of outstanding 7 1/8% notes. U.S. Industries said that the exchange offer is being undertaken in connection with its previously announced plan to extend the maturity of its debt. The company said that if the exchange offer is consummated, holders who tender their notes on or before the expiration deadline (originally set as midnight ET on Oct. 4, but later extended) will receive an amount of cash and principal amount of new 9 1/8% senior notes due Dec. 31, 2005 (the interest rate on the new notes was subsequently raised) that is together equal to the principal amount of the existing notes which are tendered. The other terms of the new notes will be substantially similar to the existing notes.

U.S. Industries also said that in connection with the exchange offer, it is also soliciting consents from a majority of the holders of the current notes to a proposed indenture amendment which would allow the cash deposited in a cash collateral account from the sales of U.S. Industries' non-core assets that is proportionally allocable to tendering holders to be used to pay the cash consideration portion of the exchange offer. In addition to the consideration, the company will pay a $5 per $1,000 principal amount of notes tendered consent payment (to be paid out of the company's general working capital) to those holders who deliver their consents to the proposed amendment by tendering their notes for exchange by the consent date, which will be the later of either Sept. 20 OR the date on which holders of a majority of the current notes deliver their consents to the proposed indenture amendment (the consent payment was subsequently raised and the consent deadline extended).

The company anticipates that the amount of cash that it will have available to distribute in exchange for the validly tendered existing notes will be approximately $110 million, of which $89.3 million is currently on deposit in a cash collateral account. As previously announced, The company expects to complete the sale of its SiTeco Holdings GmbH subsidiary by the end of September, prior to the expiration date of the exchange offer, and expects to allocate approximately $21 million of the proceeds from that sale to collateralize the current notes, and accordingly, pay this cash to the tendering holders of those notes. The cash allocable to those existing notes that are not exchanged will remain in the cash collateral account. Upon consummation of the sale of SiTeco, U.S. Industries intends to promptly publicly announce the amount of sale proceeds allocable to the holders of the existing notes. If for any reason the SiTeco sale is not consummated by the expiration date, that amount will not be available to be distributed in the exchange offer.

US Industries further announced that it has received agreement from the lenders holding a majority of the commitments under its senior bank facilities to extend the maturity of its bank debt, which is subject to customary conditions including the execution by 100% of the lenders under U.S. Industries' senior bank facilities of final documentation providing for the extension. The amendment will extend the maturity date of the bank debt from Nov. 30 of this year to Oct. 1, 2003, with a further automatic extension to Oct. 4, 2004 if the exchange offer is successful.

With the proceeds from its previously announced asset disposal plan and working capital initiatives, U.S. Industries will have reduced its total net debt and letters of credit outstanding to approximately $602 million - a reduction of approximately $751 million since June 30, 2001 - after application of the anticipated proceeds of the SiTeco sale. That debt reduction includes paydown of the company's senior debt and the credit facilities of Rexair Holdings, Inc. and Rexair, Inc. (which were acquired in August of 2001), the reduction of letter of credit facilities and the amounts deposited into collateral accounts for the benefit of the holders of our senior notes and other creditors.

The exchange offer and the related consent solicitation are subject to customary conditions, including the participation of a minimum of 90% of the current holders of 7 1/8% notes, the receipt of the requisite consents to the indenture amendment and satisfactory amendment of the bank debt.

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