Cheeseheads to the rescue....
CML Group, Inc. Announces Proposed $20 Million Convertible Note Issuance and Proposed New Senior Credit Facility
ACTON, Mass.--(BUSINESS WIRE)--July 14, 1998--
Extension of Existing Credit Facility to July 27, 1998
and Financial Viability Exception to NYSE's
Shareholder Approval Policy
CML Group, Inc. (NYSE:CML) today announced that its bank lenders have agreed in principle to extend the maturity date of its existing credit facility to July 27, 1998. In addition, it announced that it has entered into (1) a letter of intent with the State of Wisconsin Investment Board ("SWIB"), pursuant to which SWIB would purchase a convertible subordinated note of CML for a purchase price of $20 million and (2) a letter of intent with DDJ Capital Management, Inc. (on behalf of funds managed by it) ("DDJ") for a new senior credit facility of up to $65 million with a maturity date of August 1, 1999. BankBoston, N.A. will continue to provide letter of credit and trade service support to CML and will participate in a portion of the facility. In consideration of the senior credit facility, CML will issue to DDJ and BankBoston, N.A. (collectively "the New Lenders") equity in CML which will represent 19% of the company's common stock on a fully-diluted basis.
The Company also stated that, because SWIB is currently the holder of approximately 10% of the Company's outstanding common stock, the proposed purchase by SWIB of the convertible note, in and of itself, and separately, coupled with the issuance by CML to the New Lenders of a 19% equity interest in CML would normally require approval of the Company's shareholders according to the Shareholder Approval Policy of the New York Stock Exchange (the "Exchange"). Since both SWIB's note purchase and the new senior credit agreement are required to be consummated by July 27, 1998, the Company would be unable to hold a special meeting of its shareholders prior to the July 27, 1998 deadline to secure their approval of the two proposed financings.
Accordingly, pursuant to an exception provided in the Exchange's Shareholder Approval Policy, the Audit Committee of the Board of Directors of the Company determined that the delay necessary to secure approval of the note purchase by SWIB and the issuance of equity to the New Lenders in consideration of the senior credit facility would seriously jeopardize the financial viability of the Company and therefore the Audit Committee approved the Company's omission to secure the shareholder approval that would otherwise have been required under the Policy.
In reliance on the exception, CML plans to mail to all of its shareholders a letter notifying them of its intention to issue the convertible note to SWIB and the shares of CML common stock to the New Lenders without seeking their approval. It is expected that the proposed transactions will be consummated on or about July 27, 1998.
The sale of the convertible note and consummation of the new senior credit facility are subject to the preparation, execution and delivery of definitive agreements acceptable to the Company, SWIB and the New Lenders.
The Company added that the convertible note to be issued to SWIB will: (i) be convertible, at the option of SWIB, into CML common stock at a price of $4.00 per share, (ii) bear interest at the rate of 15% per annum, (iii) be prepayable at any time by CML at its option, without penalty or premium, and (iv) be paid in full five years after the date of issuance.
In addition to the issuance of shares of CML common stock to the New Lenders, the terms of the senior credit facility include (i) the payment of annual interest equal to the base rate (as defined in the credit facility) plus 4%, and, in the event of CML's failure in the future to reduce its senior credit facilities to specified levels, additional interest payable in the form of a payment-in-kind ("PIK") note equal to interest which would have accrued at the rate of 1.5% per month compounded monthly, and all PIK notes shall bear interest at the rate of 1.5% compounded monthly, (ii) a maturity date of August 1, 1999, (iii) a senior security interest in all the assets of CML and its subsidiaries, and (iv) the payment of letters of credit, commitment fees for the New Lenders plus certain additional fees and expenses of the New Lenders.
John A.C. Pound, Chief Executive Officer of CML stated, "I am gratified that CML's largest shareholder, the State of Wisconsin Investment Board, has chosen to support the Company in pursuit of new financing. CML looks forward to finalizing its new lending arrangements and benefiting from a constructive partnership with its new lenders. With this financing in place, we expect to make further announcements about the progress of our strategic review in the near future." |
