Wellman seeking $175 million credit facility in conjunction with equity investment

By Sara Rosenberg

New York, Feb. 13 - Wellman, Inc. has received commitments from JPMorgan Chase Bank and Fleet National Bank for a new $175 million credit facility. The new facility would replace the company's existing $275 million credit facility that expires in September 2003.

The company announced on Thursday that it has entered into an agreement to sell up to $125.4 million of perpetual convertible preferred stock to Warburg Pincus. With the signing of this agreement, Warburg Pincus is investing $20 million in the form of a convertible subordinated note that will be exchanged into preferred stock and receive warrants to purchase 1.25 million shares of Wellman common stock at an exercise price of $11.25 per share.

This equity transaction is contingent on the receipt of the new credit facility and shareholder approval. If shareholder approval is not obtained then Warburg Pincus will invest an additional $30 million in a convertible subordinated note (bringing the total to $50 million) conditioned upon the company closing on a $150 million credit facility, company officials said in a conference call Thursday.

Company officials continued to say that with the new equity, the company now has the ability to work with banks on a smaller credit line than its existing facility with better terms and conditions.

"Our bank line is coming up for refinancing. Without equity we would have been hard pressed to do a bank deal that satisfies our requirements," officials added, explaining that in the current market, banks and rating agencies are more conservative and with the recent loss of the company's last investment-grade rating a favorable bank agreement would have been difficult to obtain.

"We believe this investment substantially improves our financial flexibility and positions us to expand, prosper, and to build upon our strong competitive positions in the PET resin and polyester fiber businesses," said Tom Duff, chairman and chief executive officer, in a news release.

Proceeds from the equity transaction will be used primarily to pay down existing debt, a significant amount of which is maturing over the next 18 months.

"We expect the issuance of the preferred stock to provide a layer of equity capital that will substantially improve our capital structure and financial flexibility," said Keith Phillips, chief financial officer, in the release. "We believe the proceeds from this transaction will enable us to refinance our maturing debt on attractive terms and conditions."

Wellman is a Shrewsbury, N.J. manufacturer and marketer of polyester products, including Fortrel brand polyester fibers and PermaClear and EcoClear brand polyethylene terephthalate (PET) packaging resins.

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