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Note: Financial references in US dollars unless otherwise indicated
Highlights
- Reaches agreement to amend bank lines
- Suspends quarterly dividend; $56 million in annualized savings
- Raising CAD $240 million through rights offering
- Brookfield Asset Management supports offering by entering into
standby purchase agreementTORONTO, Nov. 10, 2008 /CNW/ - Norbord Inc. (TSX:NBD) today announced
initiatives to strengthen its capital structure, including a CAD $240 million
rights offering and the suspension of its CAD $0.10 quarterly dividend. The
company also confirmed that it has reached an agreement with its lenders to
renew bank line terms to provide for, among other matters, extension until
2011.
As part of these ongoing initiatives, Norbord has filed a preliminary
short form prospectus with securities regulatory authorities in Canada
relating to a rights offering (the "Offering"). Norbord intends to issue to
each eligible shareholder, as of a record date to be announced, one right
("Right") for each common share held. Each Right will entitle the holder to
purchase units of the Corporation ("Unit"). Each unit will be comprised of one
common share and one warrant.
In connection with the Offering, Norbord has entered into a Standby
Purchase Agreement with Brookfield Asset Management Inc. ("Brookfield")
(TSE:BAM; NYSE:BAM), its major shareholder. In support of the Offering,
Brookfield has agreed to exercise all of the Rights it receives and to
purchase any Units not otherwise subscribed for by other shareholders of the
Company. In exchange for Brookfield's commitment, the Company has agreed to
pay Brookfield a fee equal to 1% of the gross proceeds received from the
Offering.
"We have announced this Offering with confidence that we have excellent
operational management, the right strategy and the necessary support of our
stakeholders to emerge from the current cycle a stronger company," said Barrie
Shineton, President and CEO. "The proceeds from this Offering and renewal of
bank lines will enable Norbord to continue as a leader in the industry."
The Company expects to receive gross proceeds of up to CAD $240 million.
The net proceeds from the Offering will be used to repay all amounts owing
under the Company's existing $100 million term debt facility with Brookfield,
which will save the Company approximately $8 million per year in interest, and
to repay certain other amounts under the Company's revolving bank lines.
The number of common shares and warrants to be issued under the Offering,
final subscription price, record date and expiry date for the Offering will be
determined at the time of filing of a final short form prospectus. Under the
Standby Purchase Agreement, and subject to certain conditions, the effective
price for each common share issued under the Offering will be the lesser of
CAD $1.36 and 85% of the volume weighted average trading price of the
Company's common shares on the Toronto Stock Exchange ("TSX") for the five day
period preceding and the five day period following the date of filing of the
preliminary prospectus, subject to rounding. Norbord expects to file the final
prospectus by the end of November. Shareholders are encouraged to read the
final prospectus before making an investment decision regarding the Rights.
Shareholders that fully exercise their Rights will be entitled to
subscribe for additional Units, if available, that were not subscribed for by
other Rights holders. The Rights will be exercisable for at least 21 days
following the date of mailing of the final prospectus. The Offering is subject
to regulatory approval, including the approval of the TSX.
This news release does not constitute an offer to sell or the
solicitation of an offer to buy these securities. Securities may not be
offered or sold in the United States absent registration or an exemption from
registration under the United States Securities Act of 1933, as amended. The
Company does not intend to register any portion of this offering in the United
States.
Quarterly Dividend Payment Suspension
In response to the unprecedented financial market turmoil and uncertainty
regarding the near-term recovery of US housing starts, the Company announced
today that its Board of Directors will suspend the CAD $0.10 per share
quarterly dividend. The dividend suspension will save the Company
approximately $56 million on an annual basis or $14 million per quarter, based
on the exchange rate in effect at the end of the third quarter 2008. Norbord
confirmed that the CAD $0.10 dividend declaration made on October 24, 2008,
payable on December 21, 2008 to shareholders of record on December 1, 2008
remains in effect and will be the last payment made until further notice.
Bank Covenant Amendments
Norbord also announced today that its bank group has committed to amend
the Company's revolving bank lines by extending the term and revising the
financial covenants. The Company's bank lines will be extended to May 2011 and
the financial covenants that Norbord must comply with on a quarterly basis
will be amended to the following: minimum tangible net worth of $250 million
and maximum net debt to total capitalization, book basis of 70%. The aggregate
bank line commitment will be reduced to $205 million. These amendments are
subject to customary conditions, including the execution of definitive
documentation.
Following the use of the Offering proceeds to repay the $75 million owing
under the Company's term debt facility with Brookfield, this facility will be
amended in the same manner as the revolving bank lines and remain available to
Norbord through June 2011 in the amount of $50 million.
Norbord's third quarter 2008 liquidity, consisting of cash and cash
equivalents, unutilized bank lines and the unutilized term debt facility,
would be approximately $300 million when adjusted for the receipt and use of
proceeds from the Offering.
Norbord Profile
Norbord Inc. is an international producer of wood-based panels with
assets of $1.1 billion, employing approximately 2,700 people at 15 plant
locations in the United States, Europe and Canada. Norbord is one of the
world's largest producers of oriented strand board (OSB). In addition to OSB,
Norbord manufactures particleboard, medium density fibreboard (MDF), hardwood
plywood and related value-added products. Norbord is a publicly traded company
listed on the Toronto Stock Exchange under the symbol NBD.
This news release contains forward-looking statements, as defined in
applicable legislation. Often, but not always, words such as "will be," "would
be," "believe," "will," "expect," "expects," "expected," "forecast,"
"estimate," "estimates," "estimated," "likely," "may," "intends" and other
expressions which are predictions of or indicate future events, trends or
prospects and which do not relate to historical matters identify
forward-looking statements. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Norbord to be materially different
from any future results, performance or achievements expressed or implied by
the forward-looking statements.
Although Norbord believes it has a reasonable basis for making these
forward-looking statements, readers are cautioned not to place undue reliance
on such forward-looking information. By its nature, forward-looking
information involves numerous assumptions, inherent risks and uncertainties,
both general and specific, which contribute to the possibility that the
predictions, forecasts and other forward-looking statements will not occur.
Factors that could cause actual results to differ materially from those
contemplated or implied by forward-looking statements include: general
economic conditions; risks inherent with product concentration; effects of
competition and product pricing pressures; risks inherent with customer
dependence; effects of variations in the price and availability of
manufacturing inputs; risks inherent with a capital intensive industry; and
other risks and factors described from time to time in filings with Canadian
securities regulatory authorities.
Except as required by applicable laws, Norbord does not undertake to
update any forward-looking statements, whether as a result of new information,
future events or otherwise, or to publicly update or revise the above list of
factors affecting this information. See the "Caution Regarding Forward-Looking
Information" statement in the March 1, 2008 Annual Information Form and the
cautionary statement contained in the "Forward-Looking Statements" section of
the 2007 Management's Discussion and Analysis dated January 31, 2008.
For further information: Anita Veel, Director, Corporate & Regulatory
Affairs, (416) 643-8838, anita.veel@norbord.com
