Zoltek Companies Inc. has entered into an agreement for a new convertible debenture financing package of up to $50 million in a private placement with a group of institutional investors.
Zoltek will use the proceeds to support Zoltek’s previously announced expansion plans, including the construction and start-up of nine new carbon fibre production lines at Zoltek’s facilities in Hungary and the addition of new capacity at that plant for making acrylic precursor raw material used in the production of carbon fibre.
“”The new financing package is key to meeting rapidly expanding demand for carbon fibres, to increasing Zoltek’s sales and operating results in the near-term future, and to achieving our strategic objective of commercializing carbon fibre as competitive cost, high volume building material,”” said Zsolt Rumy, Zoltek’s Chairman and CEO. “”The financing package will enable us to almost double our capacity from what it will be at the end of this year – lifting rated carbon fibre productive capacity from 9 million to 17 million pounds a year. This is not a matter of build it (additional capacity) and they will come. All of new capacity that we are bringing on line will be used to satisfy contractual commitments to customers in 2006 and 2007.””
In order to match the cash needs to support this expansion, the financing agreement provides for the funding to occur in four separate closings of $5.0 million, $15.0 million, $20.0 million and $10.0 million, respectively. The first funding of $5.0 million was completed last week and Zoltek expects that the second tranche of $15.0 million will be completed within the next few weeks.
In the first two closings, the debentures will be issued with five-year warrants that give holders the right to purchase up to a total of 560,000 shares of Zoltek common stock at an exercise price of $14.50 per share. In the third and fourth closings, the amount and number of attached warrants will vary according to Zoltek’s share price at the time of the closing. As part of the new financing agreement, Zoltek has reduced the conversion price on its outstanding convertible debt in the aggregate principal amount of $20.0 million issued in October 2004 from $12.00 to $9.50, with the requirement that conversion take place within 30 days of the second closing.
“”We think that in the current environment this is the best, least dilutive and most expedient financing we can get,”” Rumy said. “”This financing package is a critical element in meeting the needs of our customers and taking the Company to a new level in establishing Zoltek as the leader in the commercial carbon fibre market. We therefore think it is clearly in the best interests of all of our shareholders.””
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