JLL Partners Fund V, a fund managed by JLL Partners, and Warburg Pincus Private Equity IX, an affiliate of Warburg Pincus, have delivered to the board of directors of Builders FirstSour
JLL Partners Fund V, a fund managed by JLL Partners, and Warburg Pincus Private Equity IX, an affiliate of Warburg Pincus, have delivered to the board of directors of Builders FirstSource a proposal to recapitalize the company.
Headquartered in Dallas, Texas, Builders FirstSource is a supplier and manufacturer of structural and related building products for residential new construction.
JLL and Warburg Pincus are both significant stockholders and holders of floating rate notes due 2012 issued by the company.
The recapitalization proposal contemplates the following transactions:
• A USD75m rights offering by Builders FirstSource to existing stockholders at a subscription price of USD2.00 per share, which will be backstopped by JLL and Warburg Pincus.
• The approximately USD98m of notes owned by entities affiliated with JLL and Warburg Pincus will be exchanged for common stock of Builders FirstSource valued at USD2.00 per share.
• Holders of the remaining notes may elect to exchange each USD1,000 principal amount of notes (which are currently quoted at approximately 50 per cent of par) into either (i) USD750 principal amount of a new debt security substantially similar to the existing notes, except with a maturity of 2017 and an interest rate of Libor plus 7.5 per cent, or (ii) equity on the same basis as the JLL / Warburg Pincus Notes, or (iii) any combination thereof; provided that no more than USD40m of new common stock and no less than USD20m of new common stock will be issued in the exchange.
JLL and Warburg Pincus believe the transactions will create significant value for all stakeholders of Builders FirstSource. Pro forma for the transactions, Builders FirstSource’s total debt would be reduced by between approximately USD150m and USD172m, depending on noteholder exchange and conversion participation, and cash would be increased by approximately USD75m, less fees and expenses. With less debt and more cash on its balance sheet, the company will have greater financial flexibility and an improved credit profile. Following the proposed recapitalization, JLL and Warburg Pincus believe the company will be well positioned to participate in a recovery of the housing market.
A special committee of independent directors is expected to be appointed to consider and negotiate the recapitalization proposal. The recapitalization proposal is conditional on, among other things, approval by the special committee, stockholder approval of the issuance of shares pursuant to the proposal, and the participation of at least 85 per cent in aggregate principal amount of the notes not owned by JLL and Warburg Pincus in the exchange offer.
