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Equity Offering Reduces Headwaters Interest Costs

18 Mar 2005

Headwaters repriced its first-lien bank debt from LIBOR plus 3% to LIBOR plus 2 1/4% after the company repaid $50 million of its second-lien loan and $147 million from its first-lien tranche.

Headwaters repriced its first-lien bank debt from LIBOR plus 3% to LIBOR plus 2 1/4% after the company repaid $50 million of its second-lien loan and $147 million from its first-lien tranche. The Utah-based company, which provides technologies and services to the energy, construction and home improvement industries, sold $199 million in stock to pay down the debt, which was incurred last September to finance the $715 million acquisition of building products manufacturer Tapco Holdings.

The determination to sell equity was based on strong markets, Steven Stewart, cfo, said. "There seemed to be high interest in Headwaters and we indicated back in the fall of 2004, when we acquired Tapco and redid our debt, that we would look to go to the equity markets to reduce our debt."

Morgan Stanley leads the loan, which consisted of a $640 five-year first-lien "B" loan and a $150 million second-lien tranche. The first lien was originally priced at LIBOR plus 3 1/4% but there was a step down to 3% because pricing was set on a leveraged-based grid. The second-lien is priced at LIBOR plus 5 1/2%. The amendment was done through the creation of a new term loan. The loan will have soft call protection of 101 for the first year and the second-lien tranche can be prepaid after Sept. 8. In addition, the amount of the floating to fixed hedge has been reduced from $300 million to $150 million.

"We have had a relationship with them for several years and have been pleased with their services," Stewart said of Morgan Stanley. Todd Vannucci was Headwater's point main at the bank.

18 Mar 2005

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