Georgia Gulf to Exchange 92% of Notes for Equity
Georgia Gulf Corp. (GGC), North America’s largest maker of vinyl construction products, said its bondholders agreed to exchange 92 percent of company notes for equity in a private offer intended to avert bankruptcy.
About $736 million of $800 million in aggregate principal were accepted for exchange, Atlanta-based Georgia Gulf said today in a statement. The company plans a 1-for-25 reverse stock split and will provide participating bondholders with 30.2 million shares of preferred stock convertible to the same amount of common stock, as well as 1.3 million shares of common stock.
Georgia Gulf has withheld interest payments on some bonds since April 15 as the housing slump reduced sales and said it may seek bankruptcy protection if lenders demand payment. The debt exchange reduces Georgia Gulf’s leverage and provides the company with more time for demand to recover with the housing markets, said Carl Blake, an analyst with GimmeCredit LLC.
“They are largely out of the woods in terms of the immediate financial pressures,” Blake said by telephone from Washington. “It’s an important event, but until the housing market turns around, this company still has some issues.”
Georgia Gulf fell 1 cent to 35 cents a share at 4:02 p.m. in New York Stock Exchange composite trading. The shares have declined 67 percent this year.
The debt exchange essentially cuts Georgia Gulf’s outstanding debt in half to about $714 million, including about $350 remaining in a term loan, $300 million in a revolving loan and $64 million in remaining principal on the three bonds, said Martin Jarosick, a company spokesman.
The company plans to settle the exchange offer on July 29. The reverse stock split will leave Georgia Gulf with about 3 million authorized common shares. After the offer is completed, Georgia Gulf plans to seek stockholders’ permission to increase the number of authorized shares of common stock to 100 million.
About 1.4 million shares of common stock will be outstanding after the reverse split, which should occur before the market opens on July 29, Jarosick said. The conversion of preferred shares to common stock would follow shareholder approval to issue more common stock, boosting shares outstanding to about 33 million or 34 million, he said.
Georgia Gulf acquired Canadian building-products maker Royal Group Technologies Inc. in October 2006, just as the U.S. housing market began to deteriorate.
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