Zoltek Companies Inc. has agreed to a $20 million convertible debenture financing package.
The proceeds will be used to retire bank debt, to complete the reactivation of all of the continuous carbon fibre production lines in Zoltek’s Abilene, Texas facility and to expand capacity at its Hungarian facility by continuing the conversion of all of that facility’s acrylic fibre production to carbon fibre precursor and adding new carbon fibre production capacity. All these investments are designed to address the Company’s growing order book for low-cost, high-performance carbon fibres.
The privately placed 7.5% convertible debentures mature April 2008. The debentures will be convertible into shares of Zoltek’s common stock at a price of $12.00 per share. In addition, the Company agreed to issue to the debenture investors warrants to purchase an amount of shares of the Company’s common stock equal to 30% of the number of shares to be issued upon conversion of the debentures, exercisable for a six-year period at an exercise price of $13.00 per share. The debentures are secured by the existing carbon fibre assets of Zoltek’s Hungarian subsidiary.
“”The financing package represents a strong vote of confidence in Zoltek’s future on the part of its core institutional investor group,”” said Zsolt Rumy, Zoltek’s Chairman and Chief Executive Officer. “”The financing package has achieved a better fit between our capitalization and the needs of our growing business and will enable us to meet our working capital needs and to push forward in adding new capacity to meet customer requirements for high-volume deliveries of low-cost, high-performance carbon fibres. That is Zoltek’s strategic future that we have talked about for so long, and it has finally — and clearly — arrived.””
Zoltek will use $12 million of the proceeds from the sale of convertible debentures to retire higher coupon debt to banks in Hungary; the term of the remaining $3 million loan with the Hungarian banks has been extended to October 2007. The balance of the net proceeds will support the reactivation of existing carbon fibre capacity and the installation of new capacity. Zoltek plans to add 1,000 tons of annual carbon fibre capacity in Hungary. When its existing facilities in Texas and Hungary ultimately operate at full capacity, Zoltek expects that it will be able to produce 4,500 tons of continuous carbon fibres per year. As previously reported, Zoltek is also exiting the acrylic textile market and plans to convert all its acrylic capacity in Hungary to increased production of precursor used as raw material in its carbon fibre operations. The capacity expansion and the precursor conversion to support this expansion is currently expected to be completed by May 2005.
Rumy said Zoltek had assured its customers that it would continue its long-term strategy to develop the commercial applications for carbon fibres by expanding capacity in the face of rapidly growing demand and maintaining competitive pricing to support the commercial markets. “”We are sticking to our strategy of making large quantities of commercial carbon fibres available for commercial applications at stable and affordable prices,”” Rumy said.
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