UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 7, 2006
ALBANY INTERNATIONAL CORP.
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(Exact name of registrant as specified in its charter)
Delaware 0-16214 14-0462060
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1373 Broadway, Albany, New York 12204
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 445-2200
None
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13a-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Convertible Senior Notes
On March 13, 2006, Albany International Corp. (the "Company") issued and
sold to J.P. Morgan Securities Inc., Banc of America Securities LLC, LaSalle
Financial Services, Inc., Daiwa Securities America Inc., HSBC Securities (USA)
Inc., Mitsubishi UFJ Securities International plc, Greenwich Capital Markets,
Inc. and Scotia Capital (USA) Inc. (the "Initial Purchasers") $150 million
aggregate principal amount of 2.25% Convertible Senior Notes due 2026 (the
"Notes"). In addition, the Company granted the Initial Purchasers a 13-day
option to purchase up to an additional $30 million aggregate principal amount of
the Notes to cover over-allotments, if any. The Notes were issued pursuant to an
Indenture dated as of March 13, 2006 (the "Indenture") between the Company and
JPMorgan Chase Bank, N.A., as Trustee. See Item 3.02 of this Current Report on
Form 8-K for a description of the Indenture and the Notes issued pursuant
thereto.
Convertible Note Hedge and Warrant Transactions
On March 7, 2006, the Company entered into convertible note hedge
transactions (the "Hedge Transactions") and warrant transactions (the "Warrant
Transactions") with JPMorgan Chase Bank, N.A. and Bank of America, N.A., each an
affiliate of an Initial Purchaser. See Item 3.02 of this Current Report on Form
8-K for a description of the Hedge Transactions and the Warrant Transactions.
Registration Rights Agreement
In connection with the closing of the sale of the Notes, on March 13,
2006, the Company entered into a registration rights agreement (the
"Registration Rights Agreement") with the Initial Purchasers. See Item 3.02 of
this Current Report on Form 8-K for a description of the Registration Rights
Agreement.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information provided in response to Item 3.02 of this Current Report
on Form 8-K is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
Convertible Senior Notes
On March 13, 2006, the Company issued and sold $150 million aggregate
principal amount of the Notes in a private placement to the Initial Purchasers
for resale to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act").
In connection with the closing of the sale of $150 million aggregate
principal amount of the Notes, on March 13, 2006, the Company entered into the
Indenture governing the Notes and issued a global note (the "Global Note") in an
aggregate principal amount of $150 million in the name of Cede & Co. as nominee
for The Depository Trust Company.
The material terms and conditions of the Indenture and the Notes governed
thereby are as follows:
Maturity. March 15, 2026.
Interest. The Notes will bear interest at the rate of 2.25% per year until
March 15, 2013 and at a rate of 3.25% thereafter, payable semi-annually in
arrears on March 15 and September 15 of each year, beginning September 15, 2006.
Conversion Rights. The Notes will be convertible based on the applicable
conversion rate, which initially shall be 22.4618 shares of Class A common stock
per $1,000 principal amount of Notes (which equals an initial conversion price
of approximately $44.52 per share of Class A common stock). The initial
conversion price represents a premium of approximately 20% to the $37.10 per
share closing price of the Company's Class A common stock on the New York Stock
Exchange on March 7, 2006.
Holders may convert their Notes at their option on any day prior to the
close of business on the business day immediately preceding February 15, 2013
only under the following circumstances:
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(1) during the five business-day period after any five consecutive
trading-day period (the "measurement period") in which the trading price per
Note for each day of that measurement period was less than 103% of the product
of the last reported sale price of the Company's Class A common stock and the
conversion rate on each such day; or
(2) upon the occurrence of specified corporate events.
On or after February 15, 2013 until the close of business on the business
day immediately preceding the maturity date, holders may convert their Notes at
any time, irrespective of the foregoing circumstances.
Upon conversion of a Note, a holder will receive (1) an amount in cash
equal to the lesser of the principal amount of the Note and the conversion value
thereof and (2) if the conversion value of the Note exceeds the principal amount
of the Note, shares of the Company's Class A common stock in respect of the
excess conversion value. The amounts payable on conversion of a Note will be
determined in accordance with the Indenture and will be based on a daily
conversion value calculated on a proportionate basis by reference to the volume
weighted average price of the Company's Class A common stock for each day of the
relevant twenty-five trading-day observation period applicable to the
conversion.
If a holder elects to convert its Notes in connection with a fundamental
change that occurs on or prior to March 15, 2013, the conversion rate applicable
to those Notes may be increased in certain circumstances.
Optional Redemption by the Company. The Company may redeem for cash all or
part of the Notes on or after March 15, 2013 at a price equal to 100% of the
principal amount of the Notes being redeemed, plus any accrued and unpaid
interest to but excluding the date of redemption.
Purchase at Option of Holders on Specified Dates. Holders may require the
Company to purchase for cash all or a portion of their Notes on March 15, 2013
and March 15, 2021 at a price equal to 100% of the principal amount being
repurchased plus any accrued and unpaid interest to but excluding the purchase
date.
Purchase at Option of Holders on Fundamental Change. Upon a fundamental
change, holders of the Notes may require the Company to purchase all or a
portion of their Notes at a purchase price in cash equal to 100% of the
principal amount being repurchased plus any accrued and unpaid interest to but
excluding the purchase date.
Ranking. The Notes are the Company's general unsecured obligations and
rank equally with all of the Company's existing and future senior liabilities
and senior to the Company's future indebtedness that is expressly subordinated
in right of payment to the Notes. The Notes are effectively junior to any
secured indebtedness and to all existing and future indebtedness and other
liabilities of the Company's subsidiaries.
Commissions and discounts paid to the initial purchasers in connection
with the sale of the Notes were approximately $3.75 million.
Convertible Note Hedge and Warrant Transactions
On March 7, 2006, the Company entered into the Hedge Transactions and the
Warrant Transactions with JPMorgan Chase Bank, N.A. and Bank of America, N.A.
The Hedge Transactions and Warrant Transactions are intended to reduce the
potential dilution upon future conversion of the Notes by providing the Company
with the option, subject to certain exceptions, to acquire shares which offset
the delivery of newly issued shares upon settlement of conversions of the Notes.
This has the economic effect to the Company of increasing the conversion price
of the Notes to $52.25 per share. The Company paid a premium of approximately
$39.8 million for the Hedge Transactions and received a premium of approximately
$27.7 million for the Warrant Transactions, for a net cost of approximately
$12.2 million.
Pursuant to the Hedge Transactions, if the Company gives JPMorgan Chase
Bank, N.A. or Bank of America, N.A. notice of any conversion of the Notes on or
prior to March 15, 2013, JPMorgan Chase Bank, N.A. or Bank of America, N.A. is
required to deliver to the Company the number of shares of the Company's Class A
common stock that the Company is obligated to deliver to the holders of the
Notes with respect to the conversion, calculated exclusive of shares deliverable
by the Company by reason of any additional (or "make whole") premium relating to
the Notes or by reason of any election by the Company to unilaterally increase
the conversion rate pursuant to the Indenture.
The warrants issued pursuant to the Warrant Transactions have an initial
strike price of $52.25 per share. The warrants expire over a period of sixty
trading days beginning on June 15, 2013 and are American-style warrants
(exercisable at any time).
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If the warrants are exercised when they expire, the Company may choose either
net cash or net share settlement. If the warrants are exercised before they
expire, they must be net share settled. If the Company elects to net cash settle
the warrants, the Company will pay cash in an amount equal to, for each exercise
of warrants, (i) the number of warrants exercised multiplied by (ii) the excess
of the volume weighted average price of the Company's Class A common stock on
the expiration date of such warrants (the "Settlement Price") over the strike
price. Under net share settlement, the Company will deliver to JPMorgan Chase
Bank, N.A. or Bank of America, N.A. a number of shares of the Company's Class A
common stock equal to, for each exercise of warrants, (x) the amount payable
upon net cash settlement divided by (y) the Settlement Price.
We issued and sold the warrants in transactions exempt from the
registration requirements of the Securities Act because the offer and sale did
not involve a public offering. There were no underwriting commissions or
discounts in connection with the sale of the warrants.
Registration Rights Agreement
In connection with the closing of the sale of the Notes, on March 13,
2006, the Company entered into a registration rights agreement (the
"Registration Rights Agreement") with the Initial Purchasers.
Under the Registration Rights Agreement, the Company has agreed, for the
benefit of the holders of the Notes, to file, or have on file, a shelf
registration statement with respect to the resale of the Notes and the Class A
common stock issuable upon conversion of the Notes within 90 days after the
original issuance of the Notes and to use reasonable best efforts to cause such
shelf registration statement to be declared effective within 180 days after the
original issuance of the Notes. The Company also has agreed to use its
reasonable best efforts to keep the registration statement effective until such
time as all of the Notes and the Class A common stock issuable on the conversion
thereof cease to be outstanding or have either been (A) sold or otherwise
transferred pursuant to an effective registration statement or (B) sold pursuant
to Rule 144 under circumstances in which any legend borne by the Notes or Class
A common stock relating to restrictions on transferability thereof is removed or
such Notes or Class A common stock are eligible to be sold pursuant to Rule
144(k) or any successor provision, subject to certain exceptions set forth in
the Registration Rights Agreement.
Certain of the Initial Purchasers or their affiliates have from time to
time performed, and may in the future perform, various investment banking,
financial advisory and lending services for the Company and its affiliates, for
which they have received and will receive customary fees.
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALBANY INTERNATIONAL CORP.
By: /s/ Michael C. Nahl
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Name: Michael C. Nahl
Title: Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: March 13, 2006
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