LSB Industries, Inc. Announces Transaction to Exchange Outstanding Series E-1 and F-1 Preferred Stock for Common Stock; Plans to Pay 0.3:1 Special Common Stock Dividend to Existing Common Stockholders
Transformative Transaction to Simplify Capital Structure,
Transaction Highlights:
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Eliminates the current financial impact and repayment of the accrued compounding preferred stock and future accruing dividends at 14.5% (increasing to 16.0% in
April 2023 ) unburdening the Company and unlocking shareholder value. - The Special Committee, Board of Directors and LSB management believe this could lead to a rating upgrade potentially allowing the Company to refinance its senior secured notes at a lower interest rate and on improved terms, which would reduce its cash interest expense and overall cost of capital.
- Improves the Company’s financial flexibility allowing it to pursue organic growth initiatives, including in green ammonia and clean energy and accretive M&A opportunities.
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Preserves the Company’s significant tax attributes, including approximately
$620 million of federal net operating losses, thereby protecting potentially significant future cash savings and stockholder value.
“Over the last several years we have evaluated options to reduce or eliminate our preferred stock. However, during that period, the nitrogen chemical market pricing environment has not been helpful as selling prices had been at multi-year lows. That prevented us from generating sufficient free cash flow to make cash dividend payments on the preferred stock and therefore caused the dividends thereon to accrue at a compounded rate, which significantly increased the preferred stock balance. While the nitrogen chemical market pricing environment has significantly improved and we are seeing selling prices that are now at multi-year highs, we are in a commodity business where pricing can be volatile and change quickly. As a result, we believe that now is an opportune time to take these actions especially given our desire to refinance our senior secured notes and our need for flexibility to take advantage of numerous attractive organic growth opportunities, including the emerging blue/green ammonia and clean energy markets. Additionally, we regularly evaluate M&A prospects that we believe could be accretive to earnings as a result of the increased scale and expanded production capabilities that they would provide us. We believe that the exchange of our outstanding Series E-1 and Series F-1 preferred stock and the overall simplification of our capital structure as well as the potential refinancing of our senior secured notes will be a critical step in unlocking our ability to take advantage of these opportunities.”
The LSB Board of Directors delegated authority to a committee of its independent and disinterested directors with the mandate to act in the interest of the disinterested holders of LSB’s common stock with respect to LSB’s evaluation of potential business opportunities, including potential transactions involving Eldridge. The highly qualified, independent and disinterested directors have been acting through the Special Committee and are empowered to act in the interests of the holders of LSB common stock with respect to any business opportunity that would require the holdings of Eldridge to be modified, converted or exchanged other than pursuant to the existing terms of the Securities Purchase Agreement dated
The Special Committee is composed of
In conjunction with its comprehensive evaluation of the exchange transaction, the Special Committee:
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Retained independent financial advisor,
Houlihan Lokey Capital, Inc. and -
Retained independent legal counsel,
Blank Rome
Completion of the exchange transaction is subject to a number of customary closing conditions, including receipt of stockholder approval from the holders of a majority of the shares of our outstanding common stock not held by Eldridge or any of its affiliates. LSB expects to file a preliminary proxy for a Special Meeting of Stockholders and deliver additional information related to the special meeting to stockholders within the next few weeks. Results of the stockholder vote will be tabulated at the Special Meeting of Stockholders expected to be held in the third quarter of 2021.
The Company is represented by its legal counsel,
About
About Eldridge
Eldridge invests in businesses across the Insurance, Asset Management, Technology, Mobility, Sports & Gaming, Media & Music, Real Estate, and Consumer landscapes. The firm seeks to build and grow businesses led by proven management teams that have demonstrated leadership and experience to scale an enterprise. Eldridge is headquartered in
Forward-Looking Statements
Statements in this release that are not historical are forward-looking statements within the meaning of the
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether because of new information or future developments.
No Offer or Solicitation
This communication is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the
Additional Information about the Exchange Transaction and Where to Find It
In connection with the proposed transaction, LSB intends to file with the
Participants in the Solicitation
LSB and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of LSB, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in LSB's proxy statement for its 2021 Annual Meeting of Stockholders, which was filed with the
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Company Contact:
(405) 235-4546
Investor Contact:
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