Spectrum Brands starts exchange offer, consent solicitation for 8½% notes

By Jennifer Chiou

New York, March 19 - Spectrum Brands Inc. said it launched an exchange offer to refinance its $350 million of 8½% senior subordinated notes due Oct. 1, 2013 with new senior subordinated notes due Oct. 2, 2013.

The company is also soliciting a waiver of any default under the indenture governing the 8½% notes and consents to amend the indenture to eliminate substantially all of the restrictive covenants and some default provisions.

The consent solicitation ends at 5 p.m. ET on March 29. The exchange offer expires at midnight ET on April 13.

Noteholders who exchange will receive $1,000 principal amount of new notes for each $1,000 principal amount of old notes exchanged and accrued interest up to the date of exchange. The amount includes $50.00 of new notes for those who exchange by the consent deadline.

Interest on the new notes will start at 11% through April 1, 2007 and step up in 25 or 50 basis point increments to 15.25% for the final period ending Oct. 1, 2013. If the coupon is paid in kind, the rate will be 100 bps higher.

The notes will be callable at scheduled redemption prices, reflecting a premium to par that will decline to par on Oct. 1, 2010.

The company said it expects that the indenture for the new notes will contain restrictive covenants and events of default substantially similar to those in the indenture of its outstanding 7 3/8% senior subordinated notes due 2015, including specified provisions for senior secured credit facilities of up to $1.6 billion.

The closing of the exchange offer will be subject to the receipts of tenders, consents and waivers from holders of a majority of the notes and the refinancing of the company's existing bank credit facility, which it plans to complete by March 30.

U.S. Bank NA will be the exchange agent, and Global Bondholder Services Corp. will be the information agent.

Spectrum received a notice of default on the 8½% notes on Jan. 16 because of the company's incurrence of debt under its fourth amended credit agreement. The company has 60 days from the notice to cure the default.

The company previously said it believes that it is not in default under the terms of the notes indenture, as it believes that all existing debt was incurred in compliance with the indenture.

An event of default could also result in the acceleration of Spectrum's 7 3/8% senior subordinated notes due 2015 and the credit agreement.

In connection with the exchange offer, the company said it entered into an agreement with some of the noteholders who delivered the notice of default, under which the holders agreed to waive the alleged defaults, to tender their notes in the exchange offer and to consent to the proposed amendments. The noteholders who entered into the agreement own or control a majority of the outstanding notes.

The agreement will terminate if the 8½% notes are not exchanged in the offer before April 10.

As of Sept. 30, there were $350 million of the 8½% notes outstanding, $700 million of the 7 3/8% notes outstanding and $26 million outstanding under the revolving credit facility portion of the credit agreement, as well as $1.144 billion in other debt outstanding under the credit agreement.

Spectrum Brands is an Atlanta-based consumer products company and a supplier of batteries and portable lighting, lawn and garden care products, specialty pet supplies, shaving and grooming and personal care products, and household insecticides.

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