Headwaters amends $80.9 million of its 2.875% convertible notes due 2016

By Devika Patel

Knoxville, Tenn., Dec. 22 - Headwaters Inc. revised the terms of $80.9 million of its 2.875% convertible senior subordinated notes due 2016 on Dec. 16 in privately-negotiated transactions with certain investors, according to an 8-K filed Monday with the Securities and Exchange Commission.

The new notes are substantially similar to the previous notes, except, among other things, the notes now bear interest at a rate of 16% per annum as opposed to 2.875% per annum; holders may convert their new notes into common shares at a conversion rate of 42.5532 shares per $1,000 principal amount of notes (representing a conversion price of approximately $23.50), subject to adjustment, whereas holders of the old notes had a conversion rate of 33.3333 shares per $1,000 principal amount of notes (representing a conversion price of approximately $30.00; the holders of the new notes may require the company to repurchase the new notes on June 1, 2012 as opposed to June 1, 2011; the company may redeem the new notes at any time on or after June 4, 2012 as opposed to June 4, 2011; the new notes are not subject to provisional redemption, while the old notes allowed the company to call the notes for redemption under certain circumstances prior to June 4, 2011; and the new notes contain a net share settlement feature, while the company could only settle conversion of the old notes by delivering shares.

Under the new notes' net share settlement feature, upon conversion, the company will pay holders the lesser of $1,000 or the conversion value of the new notes in cash for each $1,000 principal amount.

To the extent the conversion value exceeds the $1,000 principal amount per new note being converted, the company will issue, at its option, cash, shares, or a combination of cash and shares.

The new notes will mature on June 1, 2016.

Headwaters is a South Jordan, Utah-based diversified growth company providing products, technologies and services to the energy, construction and home improvement industries.

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