Broder Bros. amends exchange offer for 11¼% notes, altering payment consideration

By Jennifer Chiou

New York, April 28 - Broder Bros., Co. said it modified the payout in its offer to issue new 12%/15% senior payment-in-kind toggle notes due 2013 and common stock in exchange for any and all of its $225 million 11¼% senior notes due Oct. 15, 2009.

Noteholders who tender by the earlier of April 30 and the date on which the minimum tender condition is satisfied will receive a consent payment of $20.00 per $1,000 principal amount of notes, now made up of all cash. Previously, half of the consent payment was to be made in cash and the other half in new toggle notes.

Of the $20.00, half will be paid on the early settlement date and the remainder on Oct. 1.

The exchange offer will expire at 5 p.m. ET on May 14.

The company previously said that if it fails to secure the participation of at least 98% of the 11¼% notes or does not complete the exchange offer for any reason, it plans to file for Chapter 11 bankruptcy.

For each $1,000 principal amount of old notes, noteholders will receive $444.44 of new toggle notes and a pro rata share of at least 95% of the company's newly issued common stock.

The new common stock to be issued is subject to dilution upon the exercise of warrants that will be issued to the existing stockholders and the exercise of stock options that will be issued as part of a new management equity incentive plan, Broder noted.

By tendering their notes, exchange offer participants will become obligors under and beneficiaries of a mutual release under which the participating noteholders, the company and its existing equityholders will agree to release each other from all claims, subject to limited exceptions.

Noteholders who tender must deliver consents to amend the indenture governing the old notes to waive any and all defaults and events of default, eliminate substantially all of the covenants that govern the company's actions - other than the covenants to pay principal and interest when due - and eliminate or modify the related events of default.

The exchange offer is only being made to noteholders who are qualified institutional buyers, accredited institutional investors or non-U.S. persons, within the meaning of Rule 144A under the Securities Act.

Completion of the exchange offer is subject to conditions that include the absence of some adverse legal and market developments and the tender of at least $220.5 million principal amount of notes, which would result in the issuance of up to $98 million of the new toggle notes.

The company said the exchange offer is meant to reduce its leverage, extend the maturity of its senior debt, decrease its cash interest expense and enhance its near-term liquidity.

As previously reported, the company said on April 15 that it reached agreement with an ad hoc committee of noteholders to exchange the existing notes for $100 million of new notes and 95% of the company's common stock.

The committee is made up of holders owning roughly 30% of the existing notes.

Broder also said it would not make the interest payment on the notes due April 15. There is a 30-day grace period before a default occurs. Failure to pay the coupon will not cause a default on the credit facility following the recent amendment.

D.F. King & Co., Inc. (800 859-8508 or 212 269-5550) is the information agent.

Broder is a Trevose, Pa., distributor of imprintable activewear to the screen printing, embroidery and promotional product industries.

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