A. M. Castle & Co. (NYSE:CAS) (the “Company”
or “Castle”), a global distributor of specialty metal and
supply chain solutions, today announced a series of strategic
developments that have been designed to position the business for
continued transformation.
Highlights:
- W.B. & Co. and affiliates, the Company’s largest and oldest
shareholder group, increased ownership in Castle by purchasing
Raging Capital’s entire equity ownership of 4,630,795 shares,
bringing its equity ownership interest to approximately 35% of the
Company’s common stock.
- In conjunction with the sale of its entire equity ownership,
Raging Capital and the Company reached a new settlement agreement,
which includes the resignation of Raging Capital’s representatives
Kenneth Traub and Richard Burger from the Company’s Board,
effective as of November 4, 2016, and also includes stand-still
provisions limiting Raging Capital’s future actions relating to the
Company.
- The Company entered into commitment letters providing for new
$100 million secured term credit facilities (the “Credit
Facilities”) with a syndicate of lenders, which upon close are
intended to improve the Company’s liquidity position and working
capital profile.
- The Company issued an irrevocable notice that it will redeem
$27.5 million of its 12.75% Senior Secured Notes due in 2018 (the
“Notes”) on November 9, 2016 to meet the Special Redemption
Condition set forth in the indenture governing the Notes.
President and CEO Steve Scheinkman commented,
"We believe the strategic steps announced today will advance our
transformation and better position us for the future. We have
solidified support from a syndicate of lenders who have entered
into commitment letters to provide us with new $100 million secured
term loan Credit Facilities. The new Credit Facilities are
intended to replace our existing revolving credit facility, and we
believe it will provide us with additional working capital and debt
management flexibility. I am also very pleased to announce
that we have satisfied the Special Redemption Condition set forth
in the indenture governing our senior secured notes by issuing an
irrevocable notice that we will repay $27.5 million of the
outstanding Notes, at par, on November 9, 2016.”
Scheinkman continued, "Further, W.B. & Co.,
one of our oldest stockholders, showed its continuing commitment to
the Company by agreeing to purchase Raging Capital’s entire equity
position, increasing W.B.’s equity ownership to approximately 35%
of the Company’s outstanding common stock. I want to thank
the former Raging Capital members of our Board for their
participation over the last two years. We remain highly
appreciative of the continued participation of W.B., whose legacy
goes back 100 years or more with A. M. Castle.”
Scheinkman also highlighted the strength of the
Company’s new first-lien lenders, saying “We are proud to have
institutions such as Highbridge Capital, Whitebox Advisors, Corre
Partners, and Wolverine Asset Management among our new Credit
Facilities providers. Management is excited to work with
these lenders, and we believe their collective presence and
investment sends a strong message to the market that Castle has the
support of world-class institutions. Most importantly, we
believe the new Credit Facilities will enhance our liquidity and
better position the Company to advance its transformation and
capitalize on market opportunities.”
Scheinkman concluded, "Our leadership team and
all of our dedicated employees continue to work very hard to
reshape the Company and return it to profitability. We look forward
to addressing these exciting developments on Wednesday, November
9th during our regularly scheduled quarterly results call."
Raging Capital Settlement
Agreement
On November 3, 2016, A. M. Castle & Co. (the
“Company”) entered into a Settlement Agreement (the “Agreement”)
with Raging Capital Management, LLC (“Raging Capital”) and certain
of its affiliates (the “Raging Capital Group”), and Steven W.
Scheinkman, Kenneth H. Traub, Allan J. Young, and Richard N.
Burger. The Agreement supersedes the two prior settlement
agreements (as amended) by and among the Company and the Raging
Capital Group dated March 17, 2015, and May 27, 2016, which shall
have no further force or effect.
The members of the Raging Capital Group, Kenneth
H. Traub, Allan J. Young, and Richard N. Burger have agreed to
customary standstill restrictions beginning on the date of
execution of the Agreement and ending on the date that is one day
after the Company’s 2018 annual meeting of stockholders, including
specified prohibitions against solicitation of proxies, submission
of stockholder proposals, nomination of director candidates,
formation of a group, calling a special meeting, and engaging in
extraordinary transactions with or involving the Company. The
standstill restrictions are substantially consistent with those set
forth in the settlement agreement dated May 27, 2016, entered into
with the Raging Capital Group in connection with their nomination
of director candidates for the 2016 annual meeting of
stockholders.
The standstill will also restrict the parties
from acquiring beneficial ownership of shares of the Company’s
common stock (excluding (i) 18,888 shares of common stock held by
Mr. Traub as of the date of the Agreement; (ii) 18,668 shares of
common stock held by Mr. Young as of the date of the Agreement; and
(iii) shares of common stock underlying the Company’s 5.25%
Convertible Senior Notes due 2019 owned by the Raging Capital Group
as of the date of the Agreement) or beneficial ownership of any of
the Company’s 12.75% Senior Secured Notes due 2018, 7% Convertible
Notes due 2017, 5.25% Convertible Senior Notes due 2019 or any
other interests in the Company’s indebtedness (excluding
$27,500,000 principal amount of the Company’s 12.75% Senior Secured
Notes due 2018 and $2,940,000 principal amount of the Company’s
5.25% Convertible Senior Notes due 2019 currently owned by the
Raging Capital Group).
In connection with the Agreement, effective
November 4, 2016 Kenneth H. Traub and Richard N. Burger each
resigned from their respective positions as members of the Board of
the Directors of the Company and all committees of the Board on
which they served. Neither Mr. Traub’s nor Mr. Burger’s
resignations were because of a disagreement with the Company on any
matters relating to the Company’s operations, policies, or
practices.
W.B. & Co. Purchase
On November 3, 2016, W.B. & Co.
purchased all 4,630,795 shares of common stock in the Company owned
by Raging Capital Master Fund, Ltd. Jonathan B. Mellin, a
director of the Company, is one of the general partners of W.B.
& Co. and shares voting power with respect to the shares of the
Company’s common stock owned by W.B. & Co. Upon completion of
the stock sale transaction, W.B. & Co. and its affiliated
parties will own approximately 11.4 million shares of the Company’s
stock, or approximately 35%.
Commitment for New $100 million Senior
Secured Credit Facilities
On November 1, 2016, and November 2, 2016, the
Company entered into commitment letters (each, a “Commitment
Letter”) with certain financial institutions (the “Financial
Institutions”) in order to replace, and repay any amounts (and cash
collateralization of any undrawn letters of credit) outstanding
under, the Company’s existing revolving loan and security agreement
with Wells Fargo Bank, National Association as lender and
administrative agent (the “Existing Credit Agreement”).
Pursuant to the terms of the Commitment Letters, the Company’s new
Credit Facilities from the Financial Institutions will take the
form of senior-secured, first-lien, term loan credit facilities in
an aggregate principal amount of up to $100.0 million. In
connection therewith, commitments pursuant the Existing Credit
Agreement will be terminated and liens granted to the collateral
agent pursuant thereto will be released in full.
Upon initial funding of the Credit Facilities,
the Financial Institutions will be issued warrants (the “Warrants”)
to purchase an aggregate of 5,000,000 shares of the common stock of
the Company, pro rata based on the principal amount of each
Financial Institution’s commitment. The Warrants will have
exercise prices as follows: (a) 50% of the Warrants will have an
exercise price of $0.50 per share and will expire 18 months from
the date of grant and (ii) the remaining 50% of the Warrants will
have an exercise price of $0.65 per share and will expire 18 months
from the date of the grant.
The funding of the Credit Facilities is subject
to original issue discount in an amount equal to 3.00% of the full
principal amount of the Credit Facilities. The Credit Facilities
will bear interest at a rate per annum equal to 11.00%, payable
monthly in arrears. The outstanding principal amount of the Credit
Facilities provided for in the Commitment Letters and all accrued
and unpaid interest thereon will be due and be payable on September
14, 2018.
A definitive agreement with respect to the
Credit Facilities, as required by the Commitment Letter, has not
been executed and there can be no assurances that such agreement
will be executed or as to the terms of such Credit Facilities, or
that certain other conditions required by the Commitment Letter
will be satisfied.
Special Redemption of Senior Secured
Notes
As previously announced, on October 31, 2016,
the Company issued an irrevocable notice that it will redeem $27.5
million of its 12.75% Senior Secured Notes due in 2018 (the
“Notes”) on November 9, 2016, to meet the Special Redemption
Condition set forth in the indenture governing the Notes.
About A. M. Castle &
Co.
Founded in 1890, A. M. Castle & Co. is a
global distributor of specialty metal and supply chain services,
principally serving the producer durable equipment, commercial
aircraft, heavy equipment, industrial goods, construction
equipment, and retail sectors of the global economy. Its
customer base includes many Fortune 500 companies as well as
thousands of medium and smaller-sized firms spread across a variety
of industries. It specializes in the distribution of alloy and
stainless steels; nickel alloys; aluminum and
carbon. Together, Castle and its affiliated companies operate
out of 21 metals service centers located throughout North America,
Europe and Asia. Its common stock is traded on the New York
Stock Exchange under the ticker symbol "CAS".
Cautionary Statement on Risks Associated
with Forward Looking Statements
Information provided and statements contained in
this release that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (“Securities Act”), Section 21E of the
Securities Exchange Act of 1934, as amended (“Exchange Act”), and
the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements only speak as of the date of this
release and the Company assumes no obligation to update the
information included in this release. Such forward-looking
statements include information concerning our possible or assumed
future results of operations, including descriptions of our
business strategy, and the anticipated benefits of the strategic
developments and initiatives described in this press release, or
the cost savings and other benefits that we expect to achieve from
our facility closures and organizational changes. These
statements often include words such as “believe,” “expect,”
“anticipate,” “intend,” “predict,” “plan,” "should," or similar
expressions. These statements are not guarantees of
performance or results, and they involve risks, uncertainties, and
assumptions. Although we believe that these forward-looking
statements are based on reasonable assumptions, there are many
factors that could affect our actual financial results or results
of operations and could cause actual results to differ materially
from those in the forward-looking statements, including our ability
to effectively manage our operational initiatives and restructuring
activities, the impact of volatility of metals prices, the cyclical
and seasonal aspects of our business, our ability to effectively
manage inventory levels, our ability to successfully complete the
remaining steps in our strategic refinancing process, including
reaching agreement on definitive documentation on the new secured
credit facilities described in this press release, and the impact
of our substantial level of indebtedness, as well as including
those risk factors identified in Item 1A “Risk Factors” of our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2015, as amended and our Quarterly Report on Form
10-Q for the second quarter ended June 30, 2016. All future written
and oral forward-looking statements by us or persons acting on our
behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to above. Except as required by
the federal securities laws, we do not have any obligations or
intention to release publicly any revisions to any forward-looking
statements to reflect events or circumstances in the future, to
reflect the occurrence of unanticipated events or for any other
reason.
For Further Information:
-At ALPHA IR-
Analyst Contact
Chris Donovan or Chris Hodges
(312) 445-2870
Email: CAS@alpha-ir.com
Traded: NYSE (CAS)