Business News
X-Rite Announces Debt for Preferred Stock Exchange
Friday 21. August 2009 - $41.6 million reduction of second lien debt yields improved capital structure
X-Rite, Incorporated (NASDAQ:XRIT) announces that, on August 18, 2009, it entered into a series of transactions whereby X-Rite issued preferred stock and warrants to purchase common stock to existing shareholders OEPX, LLC, Sagard Capital Partners, L.P., and Tinicum Capital Partners II, L.P., in exchange for the cancellation of $41.6 million of second-lien loans. The existing shareholders had, contemporaneously with the exchange transactions, acquired the second-lien loans from one of the second lien lenders. The exchange transactions result in the reduction of the principal amount of the Companys first and second lien debt by $41.6 million to $195.1 million.
Bradley J. Freiburger, Interim Chief Financial Officer for X-Rite, commented, “While we are making significant progress with our profit improvement actions, the announced transactions create the potential for incremental cash flow going forward due to reduced cash interest requirements, and provide an enhanced cushion with respect to our financial covenants.”
Key terms of the deal include the issuance of nonconvertible preferred stock, with an aggregate liquidation preference of $41.6 million, and warrants to purchase common stock, to affiliates of One Equity Partners, Sagard and Tinicum. Dividends on the nonconvertible preferred stock will accrue at 14.375% per annum and may be paid “in kind” through the issuance of additional shares of nonconvertible preferred stock, or in cash, at X-Rites option. The Company may redeem the preferred shares anytime after February 18, 2010 and before January 24, 2014. As a part of the transactions, X-Rite also issued warrants to acquire 7.5 million shares of common stock, which will be exercisable upon receipt of shareholder approval. The warrants have an exercise price of $0.01 per share with a 10 year term.
In closing, Thomas J. Vacchiano Jr., X-Rites Chief Executive Officer, said, “We are pleased that X-Rite could further strengthen its capital structure given the lack of clarity around the timing and breadth of a market recovery. This action is expected to benefit all stakeholders of X-Rite.”
Vacchiano went on to say, “The Company will continue to increase its attention on improving the performance of the core business and executing the profit improvement plans announced earlier this year.”
RBC Capital Markets acted as an independent financial advisor to X-Rite with regard to the exchange transactions. The Company will hold a special meeting of shareholders to obtain the approval necessary to permit One Equity Partners, Sagard and Tinicum to exercise their respective warrants.