Wabash National Corporation (NYSE: WNC) has entered into a securities purchase agreement with Trailer Investments LLC, an entity formed for this purpose by Lincolnshire Equity Fund III LP.
Trailer Investments will invest $35 million in Wabash. Under the agreement, Trailer Investments will purchase $20,000,000 of Series E redeemable preferred stock comprised of 20,000 shares of Series E redeemable preferred stock at a price per share of $1,000, $5,000,000 of Series F redeemable preferred stock comprised of 5,000 shares of Series F redeemable preferred stock at a price per share of $1,000, and $10,000,000 of Series G redeemable preferred stock comprised of 10,000 shares of Series G redeemable preferred stock at a price per share of $1,000.
The dividend rates for the Series E redeemable preferred stock, Series F redeemable preferred stock and Series G redeemable preferred stock are 15% per annum, 16% per annum and 18% per annum, respectively. The dividends are payable quarterly and will be increased by 0.5% every quarter if the respective class of redeemable preferred stock is still outstanding after the five-year anniversary of the closing of the transaction.
In addition to the preferred stock, Wabash will issue to Trailer Investments a warrant that is immediately exercisable at $0.01 per share for a number of newly issued shares of common stock representing 44.21% of the issued and outstanding common stock of the company after giving effect to the issuance of the shares underlying the warrant, subject to upward adjustment to maintain that percentage if currently outstanding options are exercised and dilution protection for certain new issuances of shares of common stock, options, awards and other convertible instruments. The warrant is an integral part of the financing and is a condition to Trailer Investment’s willingness to enter into the securities purchase agreement.
Upon consummation of the investment contemplated by the securities purchase agreement, Trailer Investments will have the right to designate five out of twelve members to the Wabash board of directors. Trailer Investments will also have the following rights: rights to information delivery and access to information and management of the company; veto rights over certain significant matters of the company’s operations and business, subject to certain limitations and thresholds (including payments of dividends, issuance of securities, incurrence of indebtedness, liquidation and sale of assets, changes of the size of the Wabash board of directors, amendments of organizational documents of the company and its subsidiaries).
“This capital infusion will fortify our balance sheet, allowing us to put in place a capital structure that meets the needs of the company during this economic downturn, including to obtain needed accommodations under our existing credit agreement,” said Dick Giromini, Wabash National Corporation president and CEO. “Having conducted a thorough process to evaluate strategic alternatives, we believe that this transaction is a necessary and effective step to protect the interests of our existing stockholders, and we look forward to working with Lincolnshire Management in the future.”
In addition to the securities purchase agreement, Wabash and certain of its subsidiaries have entered into an amended and restated loan and security agreement, which modifies Wabash’s current revolving credit facility. The amendment and restatement will be effective upon the consummation of the investment contemplated by the securities purchase agreement and satisfaction of other closing conditions.
The revolving credit facility, as amended, will provide for borrowings of up to $100 million, subject to a borrowing base and applicable reserves. Upon the revolving credit facility becoming effective, as amended, the lenders have agreed to waive specified defaults that Wabash previously incurred.
Lincolnshire’s investment is subject a series of conditions, including the effectiveness of the amendment and restatement of Wabash’s revolving credit facility, compliance with the notice provisions under the exception to the NYSE Shareholder Approval Policy, the absence of any legal action that would prevent the consummation of the investment, and customary closing conditions.
The issuance of the warrant in connection with the investment would normally require approval of the company’s shareholders in accordance with the NYSE Shareholder Approval Policy. The board of directors of the company has unanimously determined that the delay necessary in securing shareholder approval prior to the issuance of the warrant to Trailer Investments would seriously jeopardize the financial viability of the company. In reaching this conclusion, the board of directors considered various factors, including factors specific to Wabash and the current conditions in the trailer industry. Citing an exception provided in the NYSE Shareholder Approval Policy for such a situation, the audit committee of the board of directors approved the company’s omission to seek the shareholder approval that would otherwise have been required under that policy. The NYSE has accepted the company’s application of the exception, according to the Wabash announcement.
Wabash is mailing to all shareholders a letter notifying them of its intention to issue the warrant without seeking shareholder approval. The closing of the transactions contemplated by the securities purchase agreement will not occur until at least ten days after such notice is mailed. The transaction is expected to close as soon as practicable following the shareholder notice period.