Associated Materials Recapitalizes to Strengthen Balance Sheet

August 4th, 2020 by Tara Taffera

Associated Materials, a North American manufacturer and distributor of exterior building products, announced Monday that it has entered into definitive agreements for a series of recapitalization transactions that the company says will de-lever its balance sheet and enhance its liquidity position significantly.

Under the transactions, holders of over 99% of the Company’s $675 million 9% senior secured notes due 2024 will fully convert those holdings into substantially all of the common equity securities of the Company. Associated Materials adds that its convertible preferred equity will also be cancelled in exchange for a portion of the new common equity of the Company.  The Company will also issue $250 million of new debt, the proceeds of which primarily will be used to provide liquidity on its balance sheet, the company says.

The transactions are expected to substantially reduce AMI’s net leverage to 2.1 times its adjusted EBITDA for the 12 months ended fiscal June 2020. This will expand the Company’s total liquidity in excess of $200 million.

Associated Materials president and CEO, Brian C. Strauss, will continue to lead the Company and serve on its new Board, and the current management team will continue in their respective roles following the closing of the recapitalization. 

From the outset of the COVID-19 pandemic, we have aggressively managed and assessed our operations, capital structure, net debt and liquidity position with an eye toward strengthening the financial foundation of our Company to address unprecedented economic challenges while continuing to serve our customers, support our employees, and partner with our suppliers,” said Strauss.  “We believe the productive negotiations with our investors will give AMI a capital structure that will support our strong operating business and set the Company up for long-term success.”

Justin Tasso, a portfolio manager and partner with Oak Hill Advisors, is expected to serve as lead director of the new Board. 

As the close of the recapitalization approaches, Oak Hill Advisors and the other Noteholders are enthused by AMI’s enhanced balance sheet and are excited to participate in AMI’s promising future alongside customers, employees, and other stakeholders,” he said. “AMI is a resilient business that has performed impressively during the COVID-19 pandemic and has many avenues towards further growth and value creation.”

The agreement is subject to customary closing conditions, and is expected to close before the end of August 2020.

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