GSI Group Finalizes Agreement With Noteholders to Significantly Reduce Its Debt
November 20 2009 - 1:50AM
PR Newswire (US)
- To Implement Pre-Arranged Debt-for-Equity Restructuring, Three
Corporate Entities File for Chapter 11 Reorganization - Operations
will continue in normal course - Company has ample liquidity
BEDFORD, Mass., Nov. 20 /PRNewswire-FirstCall/ -- GSI Group Inc.
(GSIG.PK) today announced that it has finalized an agreement with a
majority of its noteholders on a restructuring plan that will
enable the Company to significantly reduce its outstanding debt,
enhance liquidity and position the Company for future growth. Under
the terms of the agreement, substantially based on the term sheet
announced on June 30, 2009, the Company will exchange its $210
million principal amount of 11% Senior Notes for (a) a new $95
million secured loan due August 2014 and (b) common stock
representing approximately 74.3% of the Company's post-consummation
equity ownership. The Company has entered into a plan support
agreement with beneficial owners holding more than 81% of the
outstanding aggregate principal amount of the 11% Senior Notes and
representing more than 70% of all noteholders. Funds affiliated
with Goldman Sachs Asset Management, Tennenbaum Capital Partners,
LLC and Highbridge Capital Management, LLC together are expected to
own the majority of the equity of the reorganized company.
Following consummation of the restructuring plan, GSI will reduce
its debt to third parties by $115 million, from $210 million today
to $95 million. The restructuring will significantly reduce the
Company's interest cost, and no principal payments will be required
for four years. To implement the pre-arranged restructuring, three
of GSI's corporate entities -- GSI Group Inc., the parent Canadian
holding company; GSI Group Corporation; and MES International,
Inc., a non-operating subsidiary of GSI Group Corporation -- have
filed voluntary petitions for Chapter 11 reorganization under the
U.S. Bankruptcy Code in U.S. Bankruptcy Court in Wilmington,
Delaware. No other subsidiaries and no subsidiaries outside of
North America are included in the filing. Going forward, GSI's
operating subsidiaries will continue to pay all vendors, suppliers,
employees and other obligations in the ordinary course of business
unaffected by the filings. "We are very pleased to have finalized a
plan that will allow us to substantially reduce our debt and put
GSI in a stronger, financially healthier position for the future,"
said Sergio Edelstein, Chief Executive Officer of GSI. "While GSI's
debt has to be restructured as a result of the protracted economic
downturn, the Company remains operationally strong with adequate
cash on hand to meet its operational needs." "We are confident that
going into this reorganization process with a pre-agreed upon plan
with our noteholders and adequate liquidity will enable us to
implement our restructuring in an efficient and timely manner. With
an appropriately sized capital structure to support our leading
market positions, strong customer relationships, and
industry-leading products, we believe we will be well-positioned to
take advantage of business opportunities as our markets rebound."
Rick Black, Chairman of the GSI Board of Directors, added, "After
extensive negotiations with our bondholders and considerable
efforts to identify available alternatives, the Board concluded
that implementation of this pre-arranged debt-for-equity
restructuring based on the current economic environment and the
current circumstances facing the Company is the best alternative
available to maximize the interests of all stakeholders. Following
the restructuring, we believe the Company will have the capital
structure it needs to grow and generate value for our
shareholders." The Company fully expects to continue to operate in
the normal course of business during the restructuring process. The
Company plans to continue to fulfill all customer orders as usual
and provide uninterrupted customer service during the restructuring
process. The proposed Plan of Reorganization provides for all
vendors and suppliers to be paid in full. GSI will continue to pay
vendors and suppliers under normal terms in the ordinary course of
business for all goods and services provided to the Company after
the filing date of November 20, 2009. As of October 31, 2009, the
Company had cash and cash equivalents of approximately $57 million
as well as approximately $14 million of auction rate securities at
fair market value, a portion of which were subsequently sold for $3
million in net cash proceeds. Under terms of the restructuring
agreement, which is subject to court approval, the interest rate on
the new term loan will be 12.25% and, at the Company's option,
subject to the Company's compliance with a fixed charge coverage
ratio defined in the indenture for the notes, will be payable in
kind at a compounded rate of 13%. As part of the restructuring
plan, an affiliated creditor of the Company would receive
approximately 7.1% of the Company's post-consummation outstanding
shares and certain other consideration. Existing shareholders would
receive 18.6% of the post-consummation outstanding shares and
receive warrants to purchase 10% of 110% of the post-consummation
outstanding shares of the Company at an imputed price of $1.10 per
share and 10% of 110% of the post-consummation outstanding shares
of the Company at an imputed price of $2.00 per share. The proposed
Plan of Reorganization and a related Disclosure Statement have been
filed with the court and are available online at
http://www.gsirestructuring.com/. The Company also reported that it
is continuing to work to complete its financial restatements and
does not currently expect the Chapter 11 filing to unduly delay the
financial restatement process. GSI's outside legal counsel is
Wilson Sonsini Goodrich & Rosati, Professional Corporation, its
legal advisor in the restructuring is Brown Rudnick LLP and its
financial and restructuring advisor is CRG Partners. More
information about GSI is available on the company's website at
http://www.gsig.com/. For additional information, please contact
GSI Group Inc., Investor Relations, at (781) 266-5137 or . About
GSI Group Inc. GSI Group Inc. supplies precision technology to the
global medical, electronics, and industrial markets and
semiconductor systems. GSI Group Inc.'s common shares are quoted on
Pink Sheets OTC Markets Inc. (GSIG). Safe Harbor and Forward
Looking Information Certain statements in this release are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are based on current
expectations and assumptions that are subject to risks and
uncertainties. All statements contained in this news release that
do not relate to matters of historical fact should be considered
forward-looking statements, and are generally identified by words
such as "expect," "intend," "anticipate," "estimate," "plan," and
other similar expressions. These forward-looking statements include
statements regarding the proposed terms of the restructuring plan;
the Company's ability to complete the restructuring, as proposed or
otherwise, and to do so in a timely manner; whether the court will
approve the restructuring plan; the effects of the reorganization
on existing debt holders and shareholders, including anticipated
dilution and ownership post-reorganization; the impact of the
reorganization on the Company's general liquidity; the ability of
the Company and its subsidiaries to operate in the ordinary course
of business and continue paying vendors, suppliers, employees and
other obligations during the restructuring process; whether or not
vendors and suppliers will be paid in full and the terms of such
arrangements; the relative financial health of the Company; the
impact of the reorganization on existing and future customer
relationships; the impact on customer service during the
restructuring process, including the Company's ability to fulfill
customer orders as usual; the ability of the Company to generate
meaningful shareholder value; the completion of the restatement of
the Company's financial results for fiscal years 2006, 2007 and
2008; the Company's ability to file its quarterly reports on Form
10-Q and annual report on Form 10-K; the Company's estimates
regarding cash position as of October 31, 2009 and other select
financial information; and other statements that are not historical
facts. These forward looking statements involve a number of risks,
uncertainties, assumptions and other factors that could affect
future results and cause actual results and events to differ
materially from historical and expected results and those expressed
or implied in the forward looking statements, including, but not
limited to, the following: the outcome of the Company's bankruptcy
proceedings, including whether or not the proposed plan is
ultimately approved by the bankruptcy court and the final terms
thereof; the potential adverse impact of the chapter 11 bankruptcy
filing on the Company's business, financial condition or results of
operations; the Company's ability to obtain court approval with
respect to motions in the chapter 11 proceedings prosecuted from
time to time and to develop, prosecute and confirm and consummate
one or more plans of reorganization with respect to the chapter 11
proceedings and to consummate all of the transactions contemplated
by one or more of such plans of reorganization or upon which
consummation of such plans may be conditioned; the occurrence of
any event, change or other circumstance that could give rise to the
termination of the plan support agreement that the Company has
entered into with certain of its noteholders; the Company's ability
to complete and file its delayed periodic reports with the SEC; the
outcome of the Company's financial restatements and review of
financial results; the Company's ability to meet the requirements
for continued listing of its shares on Nasdaq; the risks of
existing and future litigation and governmental or other regulatory
inquiry or proceedings arising out of or related to the Company's
revenue recognition practices; risks related to the impact of
delisting on the Company, including the impact on the price of the
Company's common stock and the potential loss of confidence by
customers, suppliers, employees and the loss of institutional
investor interest in the Company; the highly unpredictable nature
of the semiconductor and electronics materials processing industry;
deteriorating market conditions; the effect of the current
financial and economic crises on credit markets, financial
institutions, customers, suppliers and consumers; the Company's
ability to reduce operating expenses and achieve anticipated cost
reductions and savings; the Company's ability to grow and increase
profitability; the impact of bookings on current and future sales
levels; future liquidity and valuation of auction rate securities;
changes in accounting standards; failures of the Company to
properly identify the timing of when revenue should be recognized;
the Company's ability to quickly increase manufacturing capacity
and promptly respond to fluctuating product demands; the Company's
need to invest in research and development; the Company's ability
to develop and deliver new competitive technology and enhancements
and customer acceptance thereof; failure to identify and manage
weaknesses in internal controls; the effects of competition; risks
related to consolidation of operations and the integration of
operations and employees of acquired businesses, including Excel;
and the Company's inability to recognize synergies of acquired
businesses, including Excel. Other important risk factors that
could affect the outcome of the events set forth in these
statements and that could affect the Company's operating results
and financial condition are discussed in the Company's Annual
Report on Form 10-K for the year ended December 31, 2007 and in the
Company's subsequent filings with the SEC made prior to or after
the date hereof. Such statements are based on the Company's
management's beliefs and assumptions and on information currently
available to the Company's management. The Company disclaims any
obligation to update any forward-looking statements as a result of
developments occurring after the date of this document. Contacts:
Media Only: Andrea Calise or Michael Freitag Kekst and Company
(212) 521-4800 All Other Inquiries: GSI Group Inc. Investor
Relations (781) 266-5137 DATASOURCE: GSI Group Inc. CONTACT: Media
Only: Andrea Calise or Michael Freitag, Kekst and Company,
+1-212-521-4800; All Other Inquiries: GSI Group Inc. Investor
Relations, +1-781-266-5137, Web Site: http://www.gsig.com/
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