A.M. Castle & Co. (OTCMKTS:CASL) Files An 8-K Entry into a Material Definitive Agreement

ME Staff 8-k

8 years ago

A.M. Castle & Co. (OTCMKTS:CASL) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive Agreement

Restructuring Support Agreement

On April 6, 2017, A.M. Castle Co. (the Company) and its
subsidiaries (the Subsidiaries) entered into a Restructuring
Support Agreement (the RSA) with certain of their creditors (the
Consenting Creditors), including certain holders of the Companys
(a) term loans under its Credit Agreement dated as of December 8,
2016, as amended (the First Lien Term Loans), (b) 12.75% Senior
Secured Notes due 2018 issued its indenture dated as of February
8, 2016, as amended (the Second Lien Notes), and (c) 5.25%
Convertible Senior Secured Notes due 2019 issued its indenture
dated as of May 19, 2016, as amended (the Third Lien Notes). The
RSA contemplates the financial restructuring of the debt and
equity of the Company and the Subsidiaries (the Restructuring) to
a Restructuring Term Sheet attached to the RSA as an exhibit (the
Term Sheet). The Term Sheet sets forth the terms and conditions
of the Restructuring and provides for the consummation thereof
either as part of out-of-court proceedings (with the prior
written consent of the required majority of Consenting Creditors)
or by prepackaged chapter 11 plan of reorganization (a Plan)
confirmed by the U.S. Bankruptcy Court for the District of
Delaware (the Bankruptcy Court) following a filing by the Company
for voluntary relief under Chapter 11 of the United States
Bankruptcy Code (the Bankruptcy Code).

Under the RSA, if proceeding in the Bankruptcy Court, the Company
agreed, among other things, to: (i) support and take all actions
that are reasonably necessary and appropriate to obtain orders of
the Bankruptcy Court in furtherance of the consummation of the
Plan and the Restructuring; (ii) timely respond to any objections
filed with the Bankruptcy Court to the entry of any such orders;
(iii) support and consummate the Restructuring in a timely
manner; (iv) execute and deliver any documents that may be
required to consummate the Restructuring; (v) take commercially
reasonable actions in furtherance of the Restructuring; and (vi)
operate its business in the ordinary course consistent with past
practice.

Under the RSA, the Company has also agreed to notify the
Consenting Creditors of certain events, including the receipt of
certain third party proposals or governmental notices, the
assertion of certain third party approval rights, anticipated
failures of a covenant or conditions under the RSA, the receipt
of certain complaints or notices of certain litigation, and any
failure by the Company to comply with the RSA. The RSA requires
the Company (i) to act in good faith and use reasonable best
efforts to support and complete successfully the solicitation of
votes on the Restructuring (the Solicitation), (ii) to use
reasonable best efforts to satisfy the milestones set forth in
the RSA, (iii) not to waive, amend or modify the definitive
documents relating to the Restructuring without the prior written
consent of the required majority of Consenting Creditors, (iv)
not to execute any such definitive document that is not
materially consistent with the RSA or is not acceptable to the
required majority of Consenting Creditors; (v) to object to any
motions in the Bankruptcy Court for any relief that is
inconsistent with the RSA in any material respect or would, or
reasonably be expected to, prevent the consummation of the
Restructuring or otherwise frustrate the purposes of the RSA;
(vi) to use reasonable best efforts to obtain any required third
party or governmental approvals of the Restructuring; (vii) to
maintain its good standing and legal existence; (viii) not to
take any actions inconsistent with the RSA, the Plan or the
Restructuring; (ix) not to delay or interfere with implementation
of the Restructuring or directly or indirectly seek or solicit
any discussions relating to, or enter into any agreements
relating to, any restructuring, sale of assets, merger, workout
or plan of reorganization of the Company other than the Plan
except as may be required by fiduciary obligations under
applicable law; (x) to provide draft copies of all definitive
documents and material motions, applications, or other documents
that the Company intends to file with the Bankruptcy Court to the
Consenting Creditors and their counsel at least five business
days prior to the date when the Company intends to file such
document, or as soon as reasonably practicable, but in no event
later than three business days, where five business days notice
is not reasonably practicable; (xi) to maintain and insure its
physical assets and facilities, and maintain books and records
consistent with prior practice; and (xii) subject to
confidentiality obligations, to timely respond to information
requests by the Consenting Creditors and provide reasonable
access to facilities and property, management, and certain books
and records.

Under the RSA, each of the Consenting Creditors agreed, among
other things: (i) to support and consummate the Restructuring in
a timely manner; (ii) to execute and deliver any documents that
may be required to consummate the Restructuring; (iii) to take
all commercially reasonable actions in furtherance of the
Restructuring; (iv) to vote any claim it holds as a holder of the
Companys debt to accept the Plan; (v) not to take or to direct
any of its debt agents to take any actions inconsistent with such
Consenting Creditors obligations under the RSA; (vi) not to
object to, delay, impede, or take any other action to interfere
with, delay, or postpone acceptance, confirmation or
implementation of the Plan, (vii) not to, directly or indirectly,
seek, solicit, encourage, assist, consent to, propose, file,
support, participate in the formulation of or vote for any
restructuring, sale of assets, merger, workout or plan of
reorganization of the Company other than the Plan and (viii)
subject to certain exceptions, to limit its ability tosell,
transfer, assign, pledge, grant a participation interest in or
otherwise dispose of, directly or indirectly, its right, title or
interest in respect of any claim relating to the debt claims that
it has against the Company in whole or in part unless the
transferee thereof is a Consenting Creditor or agrees to become a
party to the RSA.

The RSA requires the Company to use commercially reasonable
efforts to preserve relationships with current customers,
distributors, suppliers, vendors and others having business
dealings with the Company. Furthermore, under the RSA, each of
the Consenting Creditors has agreed that the Company shall not be
under any obligation to obtain consent with respect to the
payment of any trade payables and other obligations that arise in
the ordinary course of the A.M. Castle Parties business.

The RSA provides for customary conditions to the obligations of
the parties and for termination by each party upon the occurrence
of certain events, including among others, the failure of the
Company to achieve certain milestones.

to the RSA, the Company is required to commence the Solicitation
on or before May 15, 2017 on the terms set forth in the Term
Sheet. The Term Sheet provides, among other things, for the
following terms and conditions of the Restructuring:

On or prior to April 7, 2017, the Company and the Consenting
Creditors that are holders of First Lien Secured Debt Claims
will enter into an amendment to the Credit Agreement to which
certain existing financial covenants will be amended.

On or before the effective date of the Restructuring, the
Company will effectuate a rights offering (the Rights
Offering) to certain eligible holders of the First Lien Term
Loans of rights to purchase New Notes (as defined below) (the
Rights Offering Notes) for an aggregate purchase price equal
to $40 million, subject to decrease based on the Companys
opening liquidity as of the effective date of the
Restructuring. The Rights Offering Notes will be issued at a
20% discount to par, but shall otherwise contain the same
terms and conditions as the Exchange Notes offered to the
Companys other creditors, as discussed below. The Rights
Offering will be backstopped by certain Consenting Creditors
(in their capacity as such, the Backstop Parties), for which
commitment the Backstop Parties shall receive a put option
payment equal to $2.0 million (which represents 5.0% of the
maximum rights offering amount).

If necessary, the holders of the First Lien Term Loans or the
New ABL Facility (as defined below) will both consent to the
Companys use of cash collateral and/or provide the Company
with debtor-in-possession financing, in each case on terms
and conditions that shall be in form and substance acceptable
to such holders and the required majority of Consenting
Creditors. There will be no fee payable by the Company for
such debtor-in-possession financing or use of cash
collateral.

The Company will use best efforts to close on a new
asset-based revolving credit facility (the New ABL Facility)
that would be funded on the effective date of the
Restructuring. The New ABL Facility is anticipated to (a) be
secured by a perfected first priority lien(s) on all or
substantially all of the Companys assets and (b) consist of
two or more separate facilities secured, respectively and
separately, by the Companys United States/Canada operations
and the Companys foreign operations. The credit documents for
the New ABL Facility are required to be in form and substance
acceptable to the Company and the required majority of
Consenting Creditors.

If the Company is unable to close on a New ABL Facility (as
defined above) on or before the effective date of the
Restructuring, then certain of the Consenting Creditors (the
Roll-up Lenders) will provide, effective as of such date, a
new first lien term loan credit facility in an aggregate
principal amount that is sufficient, together with the
Companys cash-on-hand and the proceeds of the Rights
Offering, to refinance any outstanding indebtedness under
debtor in possession financing and the indebtedness under the
First Lien Term Loans (the Roll-up Facility). The Roll-up
Facility, if any, shall (a) bear interest at the fixed annual
rate of 10.0% for the first eighteen (18) months and 11.0%
for the next 18 months, payable in cash on each interest
payment date, (b) have a maturity date that is three years
after the effective date of the Restructuring, (c) may be
prepaid in full at any time [during the first eighteen (18)
months subject to payment of a prepayment premium equal to
101.0% of the principal amount so prepaid, and thereafter
with no prepayment penalty], and (d) shall otherwise be in
form and substance acceptable to the Roll-up Lenders, the
Company and the required majority of Consenting Creditors.

On the effective date of the Restructuring, the Company will
issue new senior secured convertible notes (the New Notes) in
an aggregate principal amount of up $167.4 million, which
shall consist of (i) $115.0 million in aggregate principal
amount of Exchange Notes, which shall be convertible into
65.2% of the New Common Stock (as defined below) before any
dilution to the new management incentive plan as discussed
below, assuming that the rights offering amount is $40
million, (ii) up to $50.0 million in aggregate principal
amount of Rights Offering Notes, which shall be convertible
into up to 28.3% of the New Common Stock before any dilution
to a new management incentive plan as discussed below,
assuming that the rights offering amount is $40 million, and
(iii) $2.4 million in aggregate principal amount of New Notes
issued to the MIP (as defined below).

The New Notes will (a) have a maturity date that is five (5)
years after the Effective Date, (b) bear interest at the
fixed annual rate of (i) if the Company has closed on a New
ABL Facility (as defined herein) on or before the Effective
Date, either (A) 5.0% payable quarterly in cash or (B) if
payment of interest in cash would trigger a covenant default
or block access to required liquidity under the New ABL
Facility, 7.0% payable quarterly in-kind or (ii) if the
Company has closed on a Roll-up Facility on or before the
Effective Date, either (A) 5.0% payable quarterly in cash or
(B) at the election of the Company based on managements
reasonable, good faith assessment of then current liquidity,
7.0% payable quarterly in kind, (c) be secured by a perfected
(i) second priority lien on all of the Companys assets that
secure the New ABL Facility and (ii) first priority lien on
any assets that do not secure the New ABL Facility, and (d)
be convertible into New Common Stock at any time at the
option of the holder of such New Notes at a conversion
premium of (20.0%) based on a total enterprise value of the
Company of $250 million.

The New Notes will be subject to anti-dilution protections
substantially consistent with those applicable to the
Existing Third Lien Secured Debt. Subject to certain
exceptions, the New Notes may be subject to a conversion cap
of 9.99% if desired by the Required Consenting Creditors. The
indenture and other credit documents for the New Notes will
otherwise be in form and substance acceptable to the Company
and the required majority of Consenting Creditors.

In full and final satisfaction of the First Lien Term Loans,
on the effective date of the Restructuring, each holder of a
First Lien Secured Debt Claim will (i) if the Company incurs
the New ABL Facility, receive payment in full in cash from
the proceeds of the Rights Offering and the New ABL Facility,
or (ii) if the Company incurs the Roll-up Facility, receive
(a) receive its pro rata share of the Roll-up
Facility and (b) cash in an amount equal to the Exit Fee (as
defined in the Credit and Guaranty Agreement dated December
8, 2016 by and among the Company, certain of its
subsidiaries, the lenders party thereto, and Cantor
Fitzgerald Securities, as Administrative and Collateral
Agent, as amended) plus all accrued and unpaid
interest through and including the effective date.

In full and final satisfaction of the Second Lien Notes, on
the effective date of the Restructuring, each holder of a
Second Lien Note will receive its pro rata share of
(a) New Notes in an aggregate principal amount equal to
$111.875 million (the 2L Exchange Notes), (b) 65.0% of the
New Common Stock, subject to dilution only on account of (i)
shares of New Common Stock issued upon conversion of the New
Notes and (ii) the MIP, and (c) cash in amount equal to $6.65
million.

In full and final satisfaction of the Third Lien Notes, on
the effective date of the Restructuring, each holder of a
Third Lien Note will receive its pro rata share of
(a) New Notes in an aggregate principal amount equal to
$3.125 million (the 3L Exchange Notes, and together with the
2L Exchange Notes, the Exchange Notes), and (b) 15.0% of the
New Common Stock, subject to dilution only on account of (i)
shares of New Common Stock issued upon conversion of the New
Notes and (ii) the MIP.

In full and final satisfaction of all existing equity
interests in the Company and related claims, on the effective
date of the Restructuring each holder of an existing equity
interest in the Company and related claim will receive such
holders pro rata share of 20.0% of the New Common
Stock, subject to dilution only on account of (i) shares of
New Common Stock issued upon conversion of the New Notes and
(ii) the MIP. On the effective date of the Restructuring, all
warrants and options to purchase equity interests in the
Company and any related claims will be cancelled.

Upon the effective date of the Restructuring, the reorganized
Company is expected to continue to be a reporting company
under the Securities Exchange Act of 1934, as amended, with a
single class of equity interest (the New Common Stock). The
Company will use all commercially reasonable efforts to have
the New Common Stock listed on the NYSE or NASDAQ upon the
effective date of the Restructuring. The holders of shares of
New Common Stock issued to Consenting Creditors in the
Restructuring or issuable upon conversion of New Notes shall
be subject to customary registration rights.

Subject to any requirements imposed by the reorganized
Companys listing exchange, the board of directors of the
reorganized Company (the New Board) shall be comprised of
five members: (i) the President and Chief Executive Officer
of the reorganized Company, (ii)(a) Jon Mellin, so long as
SGF, Inc. and any affiliated entities that hold claims
against and interests in the Company are parties to the RSA,
or (b) if such entities do not become parties to the RSA, one
director selected by the Companys existing board of
directors, and (iii) three directors selected by the
Consenting Creditors. Steven W. Scheinkman will be
chairperson of the New Board until the 2018 annual
shareholders meeting, or longer if approved by the New Board.

The reorganized Company will adopt and implement a new
management equity incentive plan (the MIP). Among other
things, the MIP will provide for 10% of the New Common Stock
outstanding as of the Effective Date on a fully diluted basis
other than on account of any dilution from shares of New
Common Stock issued upon conversion of the Rights Offering
Notes (as adjusted to exclude any OID and any Put Option
Payment associated with such notes) to be reserved for grants
to be approved by the New Board for officers, directors and
other key employees of the Reorganized Company (the MIP
Pool). The MIP Pool shall consist of $2.4 million in
aggregate principal amount of New Notes and the remainder
shall be in the form of New Common Stock.

As of the effective date of the Restructuring, the Company
and its key management will enter into new employment and
other management arrangements covering without limitation
base salary, bonus, and executive benefits, among other
things, in accordance with the RSA and Plan.

	Other than as set forth above, holders of other allowed creditor claims will either receive, on account of such claims, payment in full in cash or otherwise have their rights reinstated under the Bankruptcy Code.

The Term Sheet provides for customary conditions to the
obligations of the parties, for termination by each party upon
the occurrence of certain events, including among others, the
failure of the Company to achieve certain milestones, and for
exculpatory releases in the event the Restructuring is
consummated by a confirmed chapter 11 plan of reorganization.

The foregoing description is a summary and is qualified in its
entirety by reference to the RSA and the Term Sheet attached
thereto, which are attached hereto as Exhibit 10.1 and
incorporated herein by this reference.

Second Amendment

On April 6, 2017, the Company and certain of its subsidiaries
entered into a Second Amendment to Credit and Guaranty Agreement
(the Second Amendment) with respect to the Credit and Guaranty
Agreement dated December 8, 2016 by and among the Company,
certain of its subsidiaries, the lenders party thereto, and
Cantor Fitzgerald Securities, as Administrative and Collateral
Agent, as amended. Under the amendment, the lenders party to the
agreement and the Agent agreed that certain negative financial
covenants of the Company and its subsidiaries with respect to
operating performance, working capital, and liquidity would cease
to apply for the period from the date of the amendment until May
31, 2018.

The foregoing description is a summary and is qualified in its
entirety by reference to the Second Amendment, which is attached
hereto as Exhibit 10.2 and incorporated herein by this reference.

Item 2.02 Results of Operations and
Financial Condition.

In accordance with General Instruction B.2 to Form 8-K, the
following information shall not be deemed filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended,
nor shall it be deemed incorporated by reference in any filing
under the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such a filing.

The information regarding the results of operations and financial
condition of the Company for the fourth quarter and year ended
December31, 2016, responsive to this Item 2.02, and contained in
Exhibit 99.1 filed herewith, is incorporated by reference herein.

Item 5.03 Amendments to Articles of
Incorporation or Bylaws; Change in Fiscal Year.

On April 6, 2017, the Board determined that the Bylaws of the
Company be amended, effective immediately, to add a new Article
IX, to renumber the current Article IX as Article X and to amend
and restate the Bylaws to incorporate these amendments. New
Article IX, entitled Exclusive Forum for Certain Litigation,
provides that, unless the Company consents in writing to the
selection of an alternative forum, the Circuit Court for
Baltimore City, Maryland, or, if that Court does not have
jurisdiction, the United States District Court for the District
of Maryland, Baltimore Division, shall be the sole and exclusive
forum for (a) any derivative action or proceeding brought on
behalf of the Company, (b) any action asserting a claim of breach
of any duty owed by any director or officer or other employee of
the Company to the Company or to the stockholders of the Company,
(c) any action asserting a claim against the Company or any
director or officer or other employee of the Company arising to
any provision of the Maryland General Corporation Law or the
Companys charter or bylaws, or (d) any action asserting a claim
against the Company or any director or officer or other employee
of the Company that is governed by the internal affairs doctrine.

The foregoing description is a summary and is qualified in its
entirety by reference to the Amended and Restated Bylaws attached
thereto, which are attached hereto as Exhibit 3.1 and
incorporated herein by this reference.

Item 7.01 Regulation FD
Disclosure.

The Company has previously entered into confidential information
non-disclosure agreements (the NDAs) with certain of the
Consenting Creditors in connection with the RSA, to which the
Company provided such Consenting Creditors with certain
discussion materials concerning the Company. In accordance with
the NDAs, by the filing this Current Report on Form 8-K, the
Company is making public disclosure of the discussion materials
previously provided to such Consenting Creditors, which are
attached hereto as Exhibit 99.1.

The Company will present via live web cast its fourth quarter
2016 and full year 2016 financial results, and a preview of its
first quarter 2017 financial results, on Friday, April 7, 2017,
at 11:00 a.m. ET.and discuss the financial restructuring, market
conditions and business outlook. The call can be accessed via the
internet live or as a replay. Those who would like to listen to
the call may access the webcast through a link on the investor
relations page of the Companys website at
http://www.castlemetals.com/investors or by calling (800)
708-4540 or (847) 619-6397 and citing code 4464 9176#.

An archived version of the conference call webcast will be
available for replay at the link above approximately three hours
following its conclusion, and will remain available until the
next earnings conference call.

Item 8.01 Other Events.

On April 6, 2017, in consideration of the Restructuring, the
Board determined that it was in the best interest of the Company
to cancel the June 7, 2017 date previously scheduled for the 2017
annual meeting of shareholders of the Company, with a new date
for such meeting to be set at a later date, as required.

Cautionary Note Regarding Forward-Looking
Statements

Information provided and statements contained in this Current
Report on Form 8-K that are not purely historical are
forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (Securities Act), Section
21E of the Securities Exchange Act of 1934, as amended (Exchange
Act), and the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements only speak as of the date of this
release and the Company assumes no obligation to update the
information included in this release. Such forward-looking
statements include information concerning our possible or assumed
future results of operations, including descriptions of our
business strategy, and the cost savings and other benefits that
we expect to achieve from our facility closures and
organizational changes. These statements often include words such
as believe, expect, anticipate, intend, predict, plan, should, or
similar expressions. These statements are not guarantees of
performance or results, and they involve risks, uncertainties,
and assumptions. Although we believe that these forward-looking
statements are based on reasonable assumptions, there are many
factors that could affect our actual financial results or results
of operations and could cause actual results to differ materially
from those in the forward-looking statements. These factors
include or relate to: our ability to obtain sufficient
acceptances in connection with our solicitation of debt holder
support; our ability to obtain the bankruptcy courts approval
with respect to motions or other requests made in any necessary
chapter 11 case, including maintaining strategic control as
debtor-in-possession; our ability to confirm and consummate a
chapter 11 plan of reorganization in any necessary chapter 11
case; the effects of the filing of a chapter 11 case on our
business and the interests of various constituents; the
bankruptcy courts rulings in any necessary chapter 11 case, as
well the outcome of any such case in general; the length of time
that we will operate under chapter 11 protection and the
continued availability of operating capital during the pendency
of the chapter 11 case; risks associated with third party motions
or objections in any necessary chapter 11 cases, which may
interfere with our ability to confirm and consummate a chapter 11
plan of reorganization; the potential adverse effects of any
necessary chapter 11 case on our liquidity or results of
operations; our ability to execute the Companys business and
financial reorganization plan; and increased advisory costs to
execute our reorganization. Other factors include our ability to
effectively manage our operational initiatives and restructuring
activities, the impact of volatility of metals prices, the
cyclical and seasonal aspects of our business, our ability to
effectively manage inventory levels, our ability to successfully
complete the remaining steps in our strategic refinancing
process, and the impact of our substantial level of indebtedness,
as well as including those risk factors identified in Item 1A
Risk Factors of our Annual Report on Form 10-K for the fiscal
year ended December31, 2015, as amended, our Quarterly Report on
Form 10-Q for the second quarter ended June 30, 2016, and our
Annual Report on Form 10-K for the fiscal year ended December 31,
2016, which will be filed shortly. All future written and oral
forward-looking statements by us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary
statements contained or referred to above. Except as required by
the federal securities laws, we do not have any obligations or
intention to release publicly any revisions to any
forward-looking statements to reflect events or circumstances in
the future, to reflect the occurrence of unanticipated events or
for any other reason.

Item9.01 Financial Statements and Exhibits

(d)

Exhibits

	3.1	Amended and Restated Bylaws of the Company as adopted April 6, 2017
	10.1	Restructuring Support Agreement dated April 6, 2017 by and among the Company, certain of its subsidiaries, and certain beneficial holders or other parties signatory thereto
	10.2	Second Amendment to Credit and Guaranty Agreement, dated as of April 6, 2017, by and among the Company, certain of its subsidiaries, the Lenders party thereto, and Cantor Fitzgerald Securities, as Administrative Agent and Collateral Agent
	99.1	Press Release, dated April 7, 2017
	99.2	Company discussion materials dated March 2017 and Company supplement discussion materials dated March 2017

About A.M. Castle & Co. (OTCMKTS:CASL)
A. M. Castle & Co. is a specialty metals distribution company. The Company operates through two segments: Metal and Plastics. In its Metals segment, the Company focuses on distributing engineered specialty grades and alloys of metals, as well as providing specialized processing services. Its products include alloy, aluminum, nickel, stainless steel, carbon and titanium. Inventories of these products assume various forms, such as plate, sheet, extrusions, round bar, hexagon bar, square and flat bar, tubing and coil. The Company’s Plastics segment includes its subsidiary, Total Plastics, Inc. (TPI). The Plastics segment stocks and distributes a range of plastics in forms that include plate, rod, tube, clear sheet, tape, gaskets and fittings. Processing activities within this segment include cut-to-length, cut-to-shape, bending and forming according to customer specifications. The Company distributes and performs processing on both metals and plastics. A.M. Castle & Co. (OTCMKTS:CASL) Recent Trading Information
A.M. Castle & Co. (OTCMKTS:CASL) closed its last trading session 00.000 at 0.410 with 674,013 shares trading hands.