Georgia Gulf noteholders claim company's senior credit facility borrowings breach indenture compliance

By Jennifer Lanning Drey

Portland, Ore., June 9 - Georgia Gulf Corp. received notice of a letter of transmittal alleging that the company has incurred borrowings under its senior credit facility in excess of the amount allowed under the indenture related to its 7 1/8% notes due 2013, according to an 8-K filed with the Securities and Exchange Commission.

The notice was sent by bondholders claiming to own at least 25% of the notes.

Georgia Gulf believes all existing debt was incurred in compliance with the provisions of the indenture and has sent the noteholders a letter of response, according to the filing.

The company has also filed a complaint in the Court of Chancery in Delaware seeking to enjoin the claimants and asking for a declaratory judgment that it is not in default of the indentures.

Under the provisions of the indenture, if the company is determined to be in breach of compliance with the indenture, the company must cure the default within the 30 days of receiving written notice in order to avoid an event of default under the indenture.

If an event of default occurs, the trustee or holders of at least 25% of the notes may declare all principal, premium and accrued and unpaid interest on the notes to be immediately due and payable.

Further defaults possible

Georgia Gulf said if the notes were to be declared immediately payable, it could also lead to an event of default under the company's indenture relating to its unsecured 9½% senior notes and the indenture relating to its unsecured 10¾% senior subordinated notes. If those defaults occurred, holders of at least 25% of the notes could declare all of their principal, premium and interest immediately due and payable as well.

Additionally, the company said defaulting under the indenture could also lead to an event of default under its credit agreement, which would allow the lender agent to declare the loans immediately payable if lenders holding more than half of the loans were in agreement.

Georgia Gulf also said an event of default could lead to a liquidation event under its securitization program. Under a liquidation event, purchaser agents Wachovia Bank, NA and Bank of Tokyo-Mitsubishi UFJ, Ltd., New York, could declare a liquidation period and would no longer be required to purchase any additional receivables. Additionally, no further payments could be made on the related subordinated note and all of the collections on the receivables would be diverted to pay amounts owed to the purchasers.

This would, effectively, terminate Georgia Gulf's receivables financing, the company said.

Atlanta-based Georgia Gulf manufactures chlorovinyls, aromatics and vinyl-based building and home improvement products.

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