On April 1, 2011 Walter completed its purchase of all of Western Coal under the December 2010 Arrangement Agreement, after Western Coal shareholders approved it on March 8 and the BC court issued its final order on March 10. Walter issued 8,951,558 shares plus CAD$2,107,018,737 in cash; after the deal 62,225,827 Walter shares are outstanding, about 14.4% held by former Western Coal holders. It signed a new credit agreement with Morgan Stanley Senior Funding as agent ($950M five-year tranche A, $1,400M seven-year tranche B, $375M five-year revolver) and repaid and terminated the 2005 credit agreement with no penalties. Joe Leonard stepped down as interim CEO (staying on the board) and Keith Calder became CEO, with Calder, David Beatty and Graham Mascall joining the board; Walter shares were also conditionally approved for listing on the TSX. This resolves the Western Coal acquisition, financing and interim-CEO threads.
11 Mar 2011asset acquisition disposition▲ GoodMajor
On March 10, 2011 Walter said it had finished negotiating a lease of about 75 million tons of recoverable Blue Creek coking coal reserves in Tuscaloosa County, Alabama from a Chevron subsidiary, and had signed an agreement to buy the North River steam coal mine in Alabama from another Chevron subsidiary. The mine price is minimal cash at closing plus assumed liabilities the company does not expect to be material, and the company said it expects the deal to be neutral to slightly accretive to earnings in the first year. Both are expected to close April 30, 2011, subject to third-party consents, regulatory notice periods and no injunctions. This adds to the Alabama expansion plans mentioned earlier, separate from the pending Western Coal deal.
On Dec 2, 2010 Walter signed an Arrangement Agreement to buy all of Western Coal, following up the Nov 2010 proposal. Each Western Coal share gets CAD$11.50 in cash, 0.114 Walter shares, or a mix, with pro-ration if cash exceeds 70% or shares exceed 30%. Walter may issue up to about nine million shares (roughly 14% of those now outstanding), with closing expected in Q2 2011 and either side able to terminate if not done by June 30, 2011. Lenders (Morgan Stanley Funding, Bank of Nova Scotia, Credit Agricole) committed $2,725M of senior secured facilities to fund the cash, pay fees and refinance existing debt of both companies, which would replace the 2005 credit agreement. Western Coal would owe CAD$99M if terminated in specified circumstances, such as a change in its board's recommendation.
On Nov 23, 2010 Walter signed a seventh amendment to its credit agreement so that its purchase of 25,274,745 Western Coal shares from Audley (CAD$11.50 each) is no longer subject to a condition in the agreement. The amendment is a technical change that lets the first installment of the Audley purchase proceed; the $300.0M revolver and $138.2M term loan are described as before.
On Nov 17, 2010 Walter agreed to buy 19.8% of Western Coal Corp. (54,547,858 shares) from Audley entities at CAD$11.50 per share, about CAD$630M (US$615M), in two installments. It also proposed to buy all of Western Coal at CAD$11.50 per share in cash and Walter stock, and agreed to 14 days of exclusive talks. This is a new acquisition thread, and a large departure from the pure-Walter coal operations of earlier filings.
On Sept 3, 2009 Walter signed a sixth amendment to its 2005 credit agreement, extending the revolver's maturity from Oct 2010 to July 2, 2012 and setting its size at $300.0M (it was due to shrink to $250.0M by Dec 31, 2009). Pricing rose 100 basis points, capital expenditure and senior secured leverage covenants were removed, and the consolidated leverage limit was loosened from 2.5x to 3.0x. The $138.2M term loan due Oct 2012 is unchanged.
Walter completed the spin-off of its Financing business (Walter Investment Management LLC) on April 17, 2009, distributing about 52.8 million Spinco interests, one per Walter share held on the Feb 27, 2009 record date. Spinco then paid a taxable dividend and merged into Hanover Capital Mortgage Holdings, which was renamed Walter Investment Management Corp. This completes the spin-off and merger thread. Walter signed a trademark license, transition services, tax separation and joint litigation agreement with Spinco; Walter keeps liabilities unrelated to Spinco, such as homebuilding.
Walter and HCM amended the merger agreement so Walter can no longer waive the closing conditions on IRS rulings and an accountants' opinion about the tax-free treatment of the spin-off and merger. The SEC declared HCM's registration statement effective on Feb 18, 2009. HCM's shareholders will vote on April 15, 2009, and Walter's record date for the spin-off dividend is Feb 27, 2009. The press release says the merger is expected to close in the second quarter of 2009, pending HCM shareholder approval and other conditions, and no Walter shareholder vote is needed.
Walter, its subsidiaries and HCM restated the merger agreement a second time. It clarifies that Walter will acquire the financing business from JWH Holding Company and contribute it to Spinco, and extends the agreement's termination date to June 30, 2009. The filing says the 98.5%/1.5% ownership split and the 50-to-1 HCM share combination are unchanged. A voting agreement with HCM's insiders was also transferred to Spinco.
Walter, Spinco and HCM amended and restated the merger agreement to simplify the formula for how many shares are issued. The filing says ownership stays at 98.5% for Walter holders and 1.5% for HCM holders, with every 50 HCM shares combined into one. Walter will also bear the SEC filing and printing costs for the registration statement and proxy materials. Otherwise the original terms are unchanged.
Walter signed a merger agreement with Hanover Capital Mortgage Holdings (HCM) to separate its financing business, the non-core unit it planned to split off. The financing business, held in a new subsidiary (Spinco), would be distributed to Walter's stockholders and merged into HCM, which would be renamed Walter Investment Management Corporation. Walter holders would own about 98.5% and HCM holders about 1.5% of the combined company. Mark J. O'Brien would become Chairman and CEO. No Walter stockholder vote is required, and closing depends on conditions including HCM stockholder approval, IRS rulings and REIT qualification.
Walter agreed with underwriters (Morgan Stanley, Banc of America Securities, SunTrust Robinson Humphrey) to sell 2,800,000 new common shares at $90.75 each, for about $243.8 million of net proceeds (about $280.4 million if the underwriters' option for 420,000 more shares is fully used). It plans to repay about $68.8 million of the term loan and about $175.0 million of revolver borrowings under the 2005 Credit Agreement, with revolver commitments cut from $475.0 million to about $387.5 million. Existing holders are diluted by the new shares, while debt falls.
2 May 2008material agreement termination● NeutralMajor
On April 30, 2008, Walter repaid and terminated both Mid-State mortgage warehouse facilities (Trust IX and Trust XIV, $350.0 million combined) with no early termination penalties, ending the renewals seen in 2007. A Fifth Amendment to the credit agreement raised the revolver by $250.0 million to $475.0 million (with required reductions starting in 2009), raised pricing on the revolver and term loans by about 1.5 percent, dropped the requirement to keep $350.0 million of warehouse facilities, pre-approved the planned separation of the Financing and Homebuilding businesses, and loosened financial covenants for a time while tightening others. A same-day press release reported Q1 2008 income from continuing operations of $0.5 million ($0.01 per diluted share) versus $32.1 million a year earlier, including $28.0 million of pre-tax charges at Financing and Homebuilding, and said some metallurgical coal for 2008-2009 was settled above $315 per metric ton.
The Mid-State Trust XIV warehouse loan agreement was renewed on substantially the same terms through October 23, 2008. Together with a separate $150.0 million facility it provides $350.0 million of warehouse financing to Walter Mortgage Company; Walter Industries is not a party but benefits indirectly. It extends the earlier renewal that ran to November 2007.
Walter signed the Fourth Amendment to its October 2005 credit agreement, which substantially increases the capital expenditure limits. The filing says this is to accommodate the company's growth plan in its natural resources business; specific new limits are in the exhibit and not stated in the text.
The Mid-State Trust IX warehouse loan agreement was renewed on substantially the same terms through July 28, 2008. It, with a separate $200.0 million facility, provides $350.0 million of warehouse financing to Walter Mortgage Company; Walter Industries is not a party but benefits indirectly. This resolves the open question of the January 2007 renewal date for this facility's ongoing financing.
A further amendment to the auditor-change disclosure updates it now that the 2006 Form 10-K was filed on March 1, 2007, indicating PwC's term has ended and Ernst & Young takes over from fiscal 2007. It repeats that there were no disagreements and no adverse PwC opinions, and again mentions the 2004 shipping and handling cost control weakness remediated in 2005. It continues and completes the auditor transition.
An amended filing restating the December 20, 2006 auditor change: the Audit Committee approved dismissing PricewaterhouseCoopers after it completes the 2006 audit, with Ernst & Young appointed from fiscal 2007. The filing says there were no disagreements with PwC and no adverse opinions; the only reportable event was a 2004 material weakness over classification of shipping and handling costs, remediated in Q4 2005. The amendment was filed only to add PwC's letter to the SEC.
20 Dec 2006asset acquisition disposition● NeutralMajor
Walter completed the spin-off of Mueller Water Products on December 14, 2006, giving shareholders 1.6524432 Mueller Series B shares per Walter share held on the December 6 record date (about 85.8 million shares in total, all that Walter owned). This resolves the spin-off thread; it was structured to be tax-free apart from cash for fractional shares, and Mueller's results will now be shown as discontinued operations. Chairman, President and CEO Gregory Hyland resigned from Walter at the close of business December 14 and continues in those roles at Mueller, which took over his employment and change-in-control agreements, though Walter keeps the obligation to pay his 2006 incentive payment. A Joint Litigation Agreement with Mueller allocates responsibility for pending and future litigation and shares insurance.
An amendment renewed the Mid-State Trust XIV Loan Agreement, a warehouse financing line for the Mid-State Homes unit, through November 26, 2007, and raised the advance rate on adjustable rate accounts. Together with another $150.0 million facility it provides $350.0 million of financing; Walter Industries is not a party but the facility provides liquidity to it and its affiliates.
Walter agreed to convert a combined $99,120,000 of its 3.75% convertible notes into 5,553,723 common shares, paying a $13,031,200 inducement premium plus $638,355.41 in accrued interest and other consideration. It also announced the board rescinded the previously announced two-for-one stock split after resolving civil lawsuits with two noteholders, CC Arbitrage and CNH CA Master Account, so the split dividend declared on November 9 will not happen. The spin-off dividend of Mueller shares is not mentioned as rescinded.
Walter agreed with a holder to convert $7,257,000 of its 3.75% convertible notes into 406,611 common shares, paying a $616,845 inducement premium plus $15,874.70 accrued interest. It continues the wave of note conversions.
Walter agreed with several holders to convert a combined $22,073,000 of its 3.75% convertible notes into 1,236,755 common shares, paying a $1,983,470 inducement premium plus $45,847 accrued interest. It continues the wave of note conversions.
Walter agreed with a holder to convert $2,700,000 of its 3.75% convertible notes into 151,281 common shares, paying a $243,000 inducement premium plus $2,531.25 accrued interest. It continues the series of note conversions ahead of the dividend record date.
Walter declared two dividends: a one-for-one stock split dividend (one extra share per share held) and a spin-off dividend distributing its Mueller Water Series B shares, expected at between 1.65 and 1.94 Mueller shares per Walter share, both with a December 6, 2006 record date. Noteholders can convert before December 14, 2006 to take part, and the company said it will pay those conversions in shares. This sets up the Mueller separation and explains the conversion deals that follow.
Walter agreed with one holder to convert $11,000,000 of its 3.75% convertible notes into 616,333 new common shares, paying a $1,100,000 inducement premium plus $1,145.83 accrued interest. This cuts the company's convertible debt and adds shares, so existing holders own a smaller slice.
Walter Industries signed a supplemental indenture with the trustee for its 3.75% Convertible Subordinated Notes due 2024 to fix two drafting errors: a missing definition of 'Last Reported Sale Price' for the spin-off price calculation, and an incorrect formula in an anti-dilution clause. The filing presents these as corrections for noteholders' benefit, not a change in the deal's economics.
Mueller Water, the majority-owned subsidiary, signed a letter agreement for Thomas E. Fish to continue as President of its Anvil segment, with a $286,000 base salary, a $380,000 target bonus, a stock award valued at $230,000, and severance of 18 months' pay plus bonus multiples if he is terminated without cause. This is a subsidiary executive contract, not a change at Walter Industries itself.
