Builders FirstSource Announces Stock Offering and Debt Exchange

October 26th, 2009 by Editor

Builders FirstSource Inc. announced a $205 million common stock rights offering and debt exchange for its outstanding Second Priority Senior Secured Floating Rate Notes due 2012 (the “2012 notes”) last week. The company says this will position it to be more competitive and will fuel future growth.According to a company press release, this transaction will benefit the company by providing it with significant incremental liquidity to fund operations, deleverage its balance sheet and extend the maturity of its remaining indebtedness under the 2012 notes.

The company had formed a special committee to review a proposal submitted by its two largest stockholders, JLL Partners Fund V, L.P. (“JLL”) and Warburg Pincus Private Equity IX, L.P. (“Warburg Pincus”).

We worked hard with our advisors to provide constructive responses to the transaction proposed by JLL and Warburg Pincus, and we are pleased to have agreed upon a structure that allows current stockholders to maintain their ownership while also allowing the company to improve its liquidity and right size its balance sheet,” says Robert Griffin, chair of the special committee.

“I believe that this transaction is a message to the entire building community that Builders FirstSource has the capacity to withstand the current downturn and is prepared for the anticipated recovery,” adds Floyd Sherman, chief executive officer for Builders First Source. “We expect the company to emerge from this downturn in the building market as a stronger and better capitalized competitor.”

The company expects to raise up to $205 million of new equity capital by way of a rights offering to its stockholders to purchase common stock at a subscription price of $3.50 per share, according to the press release. It intends to use $75 million of the proceeds of the rights offering for general corporate purposes and to use any incremental proceeds to repurchase a portion of its 2012 notes. Holders of the 2012 notes will exchange, at par, their 2012 notes for cash, new notes with an interest rate of LIBOR (subject to a 3.0 percent floor) plus 1000 basis points that will mature in 2016, or a combination of cash and new notes, subject to proration.

To the extent that the gross proceeds of the rights offering are less than $205 million, holders of the 2012 notes will convert a portion of the 2012 notes into common stock at an exchange price equal to the subscription price of the rights offering.

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