ALJJ

 
Common Stock
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OTC Disclosure & News Service

 

ALJ Announces Refinance of KES Senior Credit Facility and Repurchase of KES Preferred Stock and ALJ Subordinated Debt at Discount to Par

Jun 04, 2010

OTC Disclosure & News Service

New York, NY -

ALJ Announces Refinance of KES Senior Credit Facility and Repurchase of KES Preferred Stock and ALJ Subordinated Debt at Discount to Par

 

ASHLAND, Ky., June 4, 2010 (Pink Sheets News Service)—Today, ALJ Regional Holdings, Inc. (Pink Sheets:  ALJJ) (“ALJ”) announced that its operating subsidiary KES Acquisition Company (“KES”) has refinanced its senior credit facility and repurchased 6,564 shares of its 13% Series A Preferred Stock at a discount to par, generating future cash savings of approximately $4.6 million.  Additionally, ALJ repurchased a portion of its outstanding subordinated debt at a discount to par, generating future cash savings of approximately $400,000.  In total, these two transactions, generated over $5.0 million in future cash savings to ALJ, or approximately $0.10 per share.

 

 

On May 28, 2010, KES entered into the Revolving Credit, Term Loan and Security Agreement (the “Loan Agreement”) by and among KES, the financial institutions from time to time a party thereto and PNC Bank, National Association (“PNC”), as a lender and as agent for the lenders.  The Loan Agreement provides for an asset-based revolving credit line of $23,000,000 (the “Revolver”) and a term loan of $4 million (the “Term Loan,” and together with the Revolver, the “Credit Facility”).  The Credit Facility has a three year term.  The Term Loan amortizes at $500,000 per quarter over eight quarters.  Both the Revolver and the Term Loan bear interest at variable rates based on the LIBOR or the base commercial lending rate of PNC as publicly announced from time to time.  In addition, the Credit Facility contains customary covenants, including financial covenants requiring KES to maintain certain fixed charge coverage and leverage ratios.

 

Jess Ravich, the chairman of ALJ’s board, and a certain trust for his benefit personally guaranteed the Term Loan, in exchange for payment of a guaranty fee by KES. The terms of the guaranty by Mr. Ravich were approved by the independent members of the Board of Directors of ALJ.

 

KES is using the proceeds of the Credit Facility:  (1) to repay all outstanding obligations under the Financing Agreement dated February 23, 2007, as amended, between KES and the other parties thereto, (2) to pay certain fees and expenses related to the Credit Facility, (3) for general working capital purposes and (4) to redeem shares of its 13% Series A Preferred Stock, as described in detail below.

 

On May 28, 2010, KES repurchased 6,564 shares of its 13% Series A Preferred Stock (the “Repurchased Stock”), plus accrued dividends thereon for aggregate consideration of $5.9 million (the “Stock Repurchase”).  The Repurchased Stock had a face value of approximately $6.6 million plus accrued dividends of approximately $3.9 million.  KES will realize a cash savings of approximately $4.6 million in connection with the Stock Repurchase.  The Stock Repurchase was effected pursuant to stock repurchase agreements between KES and the holders of the Repurchased Stock dated May 28, 2010.

 

Following the Repurchase there are 5,936 shares of 13% Series A Preferred Stock outstanding with an aggregate liquidation value, including the cumulative dividends of approximately $9.5 million.  By comparison the aggregate liquidation value of the 13% Series A Preferred Stock outstanding at March 31, 2010 was approximately $20.0 million.  A portion of KES’ Series A Preferred Stock, including 2,101 shares of Repurchased Stock, is held by certain affiliated parties.  The terms of the Stock Repurchase were approved by the independent members of the Board of Directors of ALJ. 

 

Also on May 28, 2010, ALJ repurchased $600,000 in principal balance plus accrued interest of $304,945 on its 4% Restated Promissory Note dated January 24, 2003 for consideration of $492,000, approximately a 54% discount for ALJ off the face value of the obligations (the “Note Repurchase”).  The purchase price was $300,000 in cash and 600,000 shares of ALJ’s Common Stock (valued at $192,000 or $0.32 per share based on the closing bid price of ALJ’s Common Stock as quoted on the Pink Sheets on May 28, 2010).  The Note Repurchase was completed under a Note Repurchase Agreement dated May 28, 2010 between ALJ and the noteholder, and generated approximately $400,000 in future cash savings to ALJ.   

 

 

ALJ is the parent company of KES Acquisition Company dba Kentucky Electric Steel, the owner and operator of a steel mini-mill near Ashland, Kentucky.

CONTACT:         

ALJ Regional Holdings, Inc. Jess Ravich  (310) 789-5741

 

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