World Airways to exchange $22.545 million convertibles, call remainder

New York, Nov. 11 - World Airways Inc. said it has agreed to exchange $22.545 million of its existing 8% convertible senior subordinated debentures due 2004 for $25.545 million of new 8% six-year convertible senior subordinated debentures.

The three institutional holders who have agreed to exchange their securities also will pay the company $3 million in cash.

The remainder of the existing 8% convertibles will be called for redemption at the same time as the exchange, the Peachtree City, Ga., air charter and wet lease company added.

It currently has $40.545 million of the securities outstanding.

The new convertibles to be issued in the exchange will be convertible into common stock at a price of $3.20 per share. They will be non-callable for one year and after that can be redeemed at par, if the company's stock closes at 200% or more of the conversion price for 20 of 30 consecutive trading days. After two years the threshold declines to 150% of the conversion price. After three years, the securities are callable regardless of stock price.

The existing convertibles had a conversion price of $8.90. World Airways stock closed at $4.85 Monday.

"This is a major step forward in our plans to restructure our debentures and secure approval for the federal loan guarantee from the Air Transportation Stabilization Board," said Hollis Harris, chairman and chief executive officer of World Airways, in a news release. "This, in parallel with our strengthening financial performance, represents very positive news for our company."

World Airways received conditional approval from the Air Transportation Stabilization Board on April 23 for a federal loan guarantee of $27.0 million, representing 90% of a new $30 million term loan. In its application for the loan guarantee, the company said it would restructure the convertibles in a manner satisfactory to the ATSB.

Closing of the convertible exchange is subject to various conditions including stockholder approval, concurrent funding of the ATSB guaranteed loan, termination of the loan facility with Wells Fargo Foothill Inc., and the call for redemption of the remaining outstanding convertibles.

World Airways said it will call the convertibles not covered by the exchange at their redemption price of 101.143% of par.

The agreement with the three holders follows an earlier exchange offer for the convertibles, which failed to reach the threshold for completion. Only $7.2 million of the securities were tendered compared to the required $38.5 million.

Under the previous exchange, World Airways was offering new 8% convertible senior subordinated debentures due 2009 for the existing securities on a one-for-one basis. The new convertibles would have had a lower conversion price of $3.20 per share subject to a 120% hurdle compared to $8.90 for the existing securities.

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