USA: Converse Inc Receives Financing Commitment
Converse Inc. (OTCBB:CVEO) today announced that it has received a commitment letter from Euro American Investment Corporation ('Euro American'), a private investment concern, to provide $25m in credit enhancement to afford the company additional liquidity under its credit agreement. Under the terms of the commitment letter, Euro American would also purchase, at $0.001 per share, 20,000,000 shares of common stock of Converse and would have an option, for six months following the closing of the $25,000,000 financing, to provide an additional $50m in secured debt financing and receive warrants to purchase up to 50,000,000 shares of stock at $1.50 per share. The commitment letter also provides for designees of Euro American to become a majority of the board of directors. The $25m financing is subject, among other things, to the negotiation of definitive legal documentation, approval by the company's board, and other customary closing conditions (including Hart-Scott-Rodino clearance) and requires the existing secured creditors of Converse to consent to the transaction. The transaction is expected to close by August 31, 2000 subject to receipt of required consents and regulatory review. As previously announced, Converse is currently in covenant default under its senior secured bank line of credit and senior secured notes, as well as interest payment default under its 7 per cent convertible subordinated notes. In addition, the trustee for the holders of 7 per cent convertible subordinated notes (the 'Subordinated Notes') has now sent Converse a letter stating that holders of at least twenty-five per cent of the Subordinated Notes had directed it to declare the full amount of principal and interest under those notes to be due and payable. Euro American and the Company have been in communication with the trustee and certain holders of the Subordinated Notes. Converse expects those communications to continue.
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