A.M. Castle arrangement lifts 12¾% notes exchange total to 98.24%

By Wendy Van Sickle

Columbus, Ohio, Feb. 11 – A.M. Castle & Co. said its offer to exchange its $210 million of 12¾% senior secured notes due 2016 for new 12¾% senior secured notes due 2018 will result in the exchange of $206,302,000, or 98.24%, of the notes.

A large chunk of that figure was the result of an agreement between one of A.M. Castle’s large equity holders and one of its large public debt holders, the company announced in a Tuesday press release.

Specifically, a company affiliated with W.B. & Co. and FOM Corp, which together hold about 28% of the company’s outstanding common stock and have two representatives serving on its board of directors, agreed to purchase about $34.7 million of existing notes from a significant holder of A.M. Castle’s public debt. The equity holder agreed to tender those newly bought notes.

Additionally, the debt holder agreed to tender the remaining roughly $23.2 million of existing notes that it holds, bringing the total of notes tendered as a result of that agreement to about $57.9 million.

A.M. Castle will pay both parties the consent payment provided for in its exchange offer of $20 per $1,000 principal amount. A.M. Castle will also reimburse the parties’ reasonable legal fees, according to the release.

A.M. Castle said it settled the $148,422,000 previously exchanged notes under the offer on Feb. 8.

The exchange offer will expire at 11:59 p.m. ET on Friday.

Following the agreement announced Tuesday between the equity holder and the debt holder, only $3,698,000 of the notes, which mature in December, remained outstanding.

“We are thrilled with the overwhelming participation in the exchange offer,” A.M Castle president and chief executive officer Steve Scheinkman said in the release.

“Ten months ago, our management team set out to both operationally restructure and refinance A.M. Castle, with an objective to improve the business’ profitability profile and better position the company for long-term growth. With [the equity- and debt-holder agreement] and the planned future exchange of our convertible notes, we have developed a clear, near-term path to financial stability, which we believe will enhance the long-term competitiveness of the business.”

Scheinkman was referencing the company’s previously announced plan to effect an exchange offer of new 5.25% senior secured convertible notes due 2019 for the existing 7% convertible notes by June 30.

On Feb. 8, the company entered into an amendment to its senior credit facility permitting the exchange of the convertibles and granting a third-priority lien to the holders of such new convertible notes.

More on the new 2018 notes

As previously reported, the new 2018 notes being traded for the existing 2016 notes have substantially the same terms as the existing notes, except for, among other things, the following:

• The new notes effectively extend the maturity date of the old notes to Dec. 15, 2018, unless A.M. Castle is unable to both (a) complete the exchange of a portion of its existing convertible notes on or prior to June 30 and (b) redeem, on one or more occasions, an aggregate of at least $27.5 million principal amount of the new 2018 notes on or prior to Oct. 31, 2016, using available cash or proceeds from asset sales, in which case the maturity date of the new notes will be Sept. 14, 2017;

• The new notes will provide that, whether or not the special redemption condition is satisfied, the company will have an obligation to effect special redemptions using designated asset sale proceeds or other permissible funds until the aggregate amount of special redemptions equals $40 million;

• The new notes will contain modifications to the asset sale covenant. The company is not to use any net proceeds from asset sales outside the ordinary course of business to redeem, repay or prepay the existing 2016 notes or the existing 7% convertibles;

• Granting of a third-priority lien on the collateral securing the new notes for the benefit of the new convertibles will be a permitted lien under the indenture; and

• The new notes will include an event of default if A.M. Castle does not complete the private convertible note exchanges by June 30.

Holders who wish to receive a copy of the eligibility letter for the exchange offer may contact D.F. King & Co., Inc. (800 591-8269 or 212 269-5550 for banks and brokers, cas@dfking.com).

A.M. Castle is a distributor of specialty metal and plastic products, value-added services and supply-chain services based in Oak Brook, Ill.

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