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): DECEMBER 2, 2003
DANIELSON HOLDING CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-6732 95-6021257
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(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2 NORTH RIVERSIDE PLAZA
SUITE 600
CHICAGO, ILLINOIS 60606
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(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
(312) 466-4030
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER MATERIAL EVENTS AND REGULATION FD DISCLOSURES.
On December 2, 2003, Danielson Holding Corporation (the "Company")
issued a press release announcing that it had executed a definitive investment
and purchase agreement ("Purchase Agreement") to acquire the energy and water
businesses of Covanta Energy Corporation ("Covanta") in connection with
Covanta's emergence from Chapter 11 proceedings in bankruptcy. The Company will
not acquire Covanta's geothermal and other assets, the dispositions of which
are already under contract with other buyers under Covanta's Chapter 11
process. A copy of the press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference thereto.
To implement the proposed transaction, Covanta is required under the
Purchase Agreement to file with the Bankruptcy Court for the Southern District
of New York (the "Bankruptcy Court"), where its Chapter 11 cases are pending a
new, alternative proposed plan of reorganization, a new, alternative proposed
plan of liquidation for certain non-core businesses (the "DHC Transaction
Plans"), and an accompanying draft disclosure statement, each reflecting the
transactions contemplated under the Purchase Agreement. The proposed
transactions under the Purchase Agreement do not affect Covanta's plans to sell
its geothermal assets to affiliates of Ormat Nevada, Inc. which were declared
the winning bidders following the auction of those assets. The Purchase
Agreement further requires Covanta to continue indefinitely the confirmation
hearing for its pending reorganization and liquidation plans involving an
Employee Stock Ownership Plan (the "ESOP Plans") while Covanta pursues
confirmation of the DHC Transaction Plans. On December 3, 2003, the Bankruptcy
Court continued the confirmation hearing for the ESOP Plans until January 14,
2004. This date coincides with the proposed date for approval of the disclosure
statement related to the DHC Transaction Plans. On December 16, 2003, the
Bankruptcy Court will hold a hearing regarding approval of the expense
reimbursement, termination fee and exclusivity provisions of the Purchase
Agreement, as well as procedures for giving notice of and setting a hearing date
(proposed to be January 14, 2004) for approval of the disclosure statement
related to the DHC Transaction Plans.
The proposed transaction between the Company and Covanta remains
subject to the completion and satisfaction of the terms thereof, of certain
documentation, a favorable vote in favor of the DHC Transaction Plans by holders
of claims against Covanta and certain of its affiliates entitled to vote
thereon, and entry of an order by the Bankruptcy Court confirming the DHC
Transaction Plans. There can be no assurance that the Bankruptcy Court will
approve, or that the holders of claims against Covanta and certain of its
affiliates will vote to support the DHC Transaction Plans or that final
documentation will be reached on terms satisfactory to all parties. Subject to
timely receipt of these approvals, the Company and Covanta anticipate the
transaction to close near the end of the first calendar quarter of 2004.
Under the terms of the Purchase Agreement, the Company would acquire
100% of Covanta's equity interests in consideration for $30 million. In
addition, the Company would be required to arrange a new $118 million
replacement letter of credit facility for Covanta, secured by a second lien on
Covanta's domestic assets (the "Second Lien Facility"). The Company has obtained
commitments from certain of its shareholders to arrange for or to provide the
Second Lien
Facility to Covanta. With respect to Covanta's domestic operations, the Purchase
Agreement also contemplates the implementation of a new $139 million first lien
secured letter of credit facility and the issuance of $205 million of senior
notes accreting to $230 million by 2011 and secured by a third lien on Covanta's
domestic assets. Finally, Covanta also would issue a yet to be determined amount
of unsecured notes to other creditors. The summary of the transaction described
above is qualified by reference to the Purchase Agreement, a copy of which is
attached hereto as Exhibit 2.1 and incorporated herein by referenced thereto.
Upon consummation of the contemplated transactions with the Company,
Covanta expects to emerge from bankruptcy with approximately $50 million in
cash and revolving credit facility availability, subject to working capital
fluctuations. D. E. Shaw Laminar Portfolios, L.L.C. ("Laminar"), a significant
creditor of Covanta, has agreed with the Company to provide a $10 million
secured revolving loan facility to Covanta's international operations (the
"International Revolving Credit Facility"), which would also issue up to $95
million of 3-year term debt to Covanta's creditors, secured by Covanta's
international assets.
The Company has obtained the financing necessary for the Covanta
acquisition from three of its shareholders: SZ Investments, L.L.C. ("SZI"),
Third Avenue Trust, on behalf of Third Avenue Value Fund Series ("TAVF"), and
Laminar, pursuant to a Note Purchase Agreement dated December 2, 2003 ("Note
Purchase Agreement"). Pursuant to the Note Purchase Agreement, SZI, TAVF and
Laminar have provided $40 million of bridge financing to the Company in exchange
for notes convertible into shares of the Company's common stock at a price of
$1.53 per share (the "Bridge Notes"). The Bridge Notes have a scheduled maturity
date of January 2, 2005 and an extended maturity date as late as July 15, 2005,
and bear interest at a rate of 12% through July 15, 2004 and 16% thereafter. In
the event of a default or the failure to pay the Bridge Notes upon their
maturity, the interest rate under the Bridge Notes increases by 2%. The Company
is using $30 million of the proceeds from the Bridge Notes to post a deposit
with Covanta. A deposit of $15 million was made with Covanta upon signing of the
Purchase Agreement and the remaining $15 million is due within two business days
following issuance of an order of the Bankruptcy Court approving the expense
reimbursement, termination fee and exclusivity provisions of the Purchase
Agreement. Upon closing of the transactions contemplated under the Purchase
Agreement, the deposit would then be used as the Company's purchase price for
Covanta's equity interests. The Company will use the remainder of the proceeds
to pay certain transaction expenses and for general corporate purposes, subject
to certain limitations. In consideration for the $40 million of bridge financing
and the agreement by SZI, TAVF and Laminar to arrange or provide for the Second
Lien Credit Facility and for Laminar to arrange or provide for the International
Revolving Credit Facility, the Company has agreed to issue to SZI, TAVF and
Laminar an aggregate of 5,120,853 shares of the Company's common stock.
The Company expects to refinance the Bridge Notes through a rights
offering to its shareholders following the closing of the Covanta acquisition.
The Company intends to issue rights to purchase 0.75 shares for each outstanding
share of the Company's common stock at an exercise price of $1.53 per share in a
registered rights offering. If the Company does not refinance all of the
outstanding Bridge Notes, the remainder of the Bridge Notes would be
convertible into shares of Danielson common stock at the rights offering price
of $1.53 per share, subject to certain agreed upon limitations. In addition, if
the Bridge Notes are not refinanced due to an uncured default by SZI, TAVF or
Laminar under the Note Purchase Agreement, $30 million of the Bridge Notes
(including accrued interest relating thereto) will be forgiven and the remaining
outstanding amounts under the Bridge Notes will convert into the Company's
common stock.
In addition, (1) Laminar is required under the Note Purchase Agreement
to convert an amount of Bridge Notes to acquire up to an additional 8.75 million
shares of the Company's common stock at $1.53 per share based upon the levels of
public participation in the rights offering and subject to certain agreed upon
limitations; and (2) the Company has agreed, in connection with the Purchase
Agreement, to sell up to 3 million shares of the Company's common stock at $1.53
per share to certain creditors of Covanta based upon the levels of public
participation in the rights offering and subject to certain agreed upon
limitations.
The summary of the transactions described above is qualified by
reference to the Note Purchase Agreement, and certain exhibits thereto, a copy
of which is attached hereto as Exhibit 2.2 and incorporated herein by reference
thereto.
In addition, Laminar has agreed to certain transfer restrictions upon
the shares of the Company's common stock that it holds or will acquire and, in
accordance with the transfer restrictions contained in Article Fifth of the
Company's charter restricting the resale of the Company's common stock by 5%
shareholders, the Company has agreed with Laminar to provide it with limited
rights to resell the common stock that it holds pursuant to a letter agreement
dated December 2, 2003, a copy of which is attached hereto as Exhibit 10.1 and
incorporated herein by reference. Finally, the Company has agreed with Laminar,
SZI and TAVF to file a registration statement with the Securities and Exchange
Commission to register the shares of the Company's common stock issued to them
under the Note Purchase Agreement not later than the earlier of June 30, 2004
and ten days after closing of the rights offering. The summary of the
registration rights described above is qualified by reference to the
Registration Rights Agreement, a copy of which is attached hereto as Exhibit
4.1 and incorporated by referenced herein.
Sam Zell, Chairman of the Board of Directors and Chief Executive
Officer of the Company, Philip G. Tinkler, Chief Financial Officer of the
Company and William Pate, a Director of the Company, are affiliated with SZI.
Martin Whitman and David Barse, Directors of the Company, are affiliated with
TAVF. The Note Purchase Agreement and other transactions involving SZI, TAVF and
Laminar were negotiated, reviewed and approved by a special committee of the
Company's Board of Directors composed solely of disinterested directors (the
"Special Committee") and advised by independent legal and financial advisors.
Further, in response to a request by the Special Committee, Equity Group
Investments, L.L.C., an entity affiliated with Messrs. Zell, Tinkler and Pate,
has agreed to terminate its consulting and advisory agreement with the Company.
A copy of the termination letter is attached hereto as Exhibit 10.2 and
incorporated herein by reference.
THIS CURRENT REPORT ON FORM 8-K SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OF COVANTA ENERGY
CORPORATION, DANIELSON HOLDING CORPORATION OR ANY OF THEIR AFFILIATES NOR SHALL
THERE BE ANY SALE OF SECURITIES IN ANY STATE OR JURISDICTION IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE OR JURISDICTION, OR, IF FOR THE ADMINISTRATIVE CONVENIENCE OF THE
COURT SYSTEM, THE PROPOSED TRANSACTIONS ARE IMPLEMENTED THROUGH A VOLUNTARY
PLAN UNDER THE BANKRUPTCY CODE, A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11
PLAN UNDER THE BANKRUPTCY CODE. ANY SUCH OFFER OR SOLICITATION WILL BE MADE IN
COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE
BANKRUPTCY CODE.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements made herein may constitute "forward-looking" statements as
defined in Section 27A of the Securities Act of 1933 (the "Securities Act"),
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases
made by the Securities and Exchange Commission, all as may be amended from time
to time. Such forward looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company and its subsidiaries, or industry
results, to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Statements that are not historical fact are forward-looking statements. Forward
looking statements can be identified by, among other things, the use of
forward-looking language, such as the words "plan", "believe", "expect",
"anticipate", "intend", "estimate", "project", "may", "will", "would", "could",
"should", "seeks", or "scheduled to", or other similar words, or the negative
of these terms or other variations of these terms or comparable language, or by
discussion of strategy or intentions. These cautionary statements are being
made pursuant to the Securities Act, the Exchange Act and the PLSRA with the
intention of obtaining the benefits of the "safe harbor" provisions of such
laws. The Company cautions investors that any forward-looking statements made
by the Company are not guarantees or indicative of future performance.
Important assumptions and other important factors that could cause actual
results to differ materially from those forward-looking statements with respect
to the Company, include, but are not limited to, Covanta's and the Company's
ability to successfully consummate the transactions contemplated by the
proposed acquisition and financial restructuring, Covanta's ability to obtain
the consent of its creditors; and other factors, risks and uncertainties that
are described in Item 1 of the Company's Annual Report on Form 10-K for the
year ended December 27, 2002 and in other securities filings by Danielson or
Covanta. Although the Company believes that its plans, intentions and
expectations reflected in or suggested by such forward-looking statements are
reasonable, actual results could differ materially from a projection or
assumption in any of its forward-looking statements. The Company's future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and uncertainties. The
forward-looking statements contained in this press release are made only as of
the date hereof and neither the Company nor Covanta has any or has undertaken
any obligation to update or revise any forward-looking statements whether as a
result of new information, subsequent events or otherwise, unless otherwise
required by law.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of business acquired: [Not applicable].
(b) Pro forma financial information: [Not applicable].
(c) Exhibits. The following exhibits are filed with this document:
2.1 Investment and Purchase Agreement between Danielson Holding
Corporation and Covanta Energy Corporation dated December 2,
2003.*
* All schedules to this Exhibit 2.1 filed herewith
have been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A list of the omitted schedules appears at
the end of this Exhibit 2.1. The Company will supplementally
furnish a copy of any omitted schedule to the Commission upon
request.
2.2 Note Purchase Agreement between Danielson Holding Corporation
and SZ Investments, L.L.C., Third Avenue Trust, on behalf of
Third Avenue Value Fund, and D. E. Shaw Laminar Portfolios,
L.L.C. dated December 2, 2003.*
* All schedules to this Exhibit 2.2 filed herewith
have been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A list of the omitted schedules appears at
the end of this Exhibit 2.2. The Company will supplementally
furnish a copy of any omitted schedule to the Commission upon
request.
4.1 Registration Rights Agreement between between Danielson
Holding Corporation and SZ Investments, L.L.C., Third Avenue
Trust, on behalf of Third Avenue Value Fund Series, and
D. E. Shaw Laminar Portfolios, L.L.C. dated December 2, 2003.
10.1 Letter Agreement between Danielson Holding Corporation and D.
E. Shaw Laminar Portfolios, L.L.C. dated December 2, 2003.
10.2 Letter Agreement between Danielson Holding Corporation and
Equity Group Investments, L.L.C. dated December 1, 2003.
99.1 Press Release issued by Danielson Holding Corporation, dated
December 2, 2003, regarding the agreement to acquire Covanta
Energy Corporation.
SIGNATURES
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 thereunto duly authorized.
Date: December 5, 2003
DANIELSON HOLDING CORPORATION
(Registrant)
By: /s/ Philip G. Tinkler
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Name: Philip G. Tinkler,
Title: Chief Financial Officer
DANIELSON HOLDING CORPORATION
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
2.1 Investment and Purchase Agreement between Danielson
Holding Corporation and Covanta Energy Corporation dated
December 2, 2003.*
* All schedules to this Exhibit 2.1 filed herewith have
been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A list of the omitted schedules appears
at the end of this Exhibit 2.1. The Company will
supplementally furnish a copy of any omitted schedule to
the Commission upon request.
2.2 Note Purchase Agreement between Danielson Holding
Corporation and SZ Investments, L.L.C., Third Avenue
Trust, on behalf of Third Avenue Value Fund, and D. E.
Shaw Laminar Portfolios, L.L.C. dated December 2, 2003.
* All schedules to this Exhibit 2.2 filed herewith have
been omitted in accordance with Item 601(b)(2) of
Regulation S-K. A list of the omitted schedules appears
at the end of this Exhibit 2.2. The Company will
supplementally furnish a copy of any omitted schedule to
the Commission upon request.
4.1 Registration Rights Agreement between between Danielson
Holding Corporation and SZ Investments, L.L.C., Third
Avenue Trust, on behalf of Third Avenue Value Fund Series,
and D. E. Shaw Laminar Portfolios, L.L.C. dated December 2,
2003.
10.1 Letter Agreement between Danielson Holding Corporation
and D. E. Shaw Laminar Portfolios, L.L.C. dated December
2, 2003.
10.2 Letter Agreement between Danielson Holding Corporation and
Equity Group Investments, L.L.C. dated December 1, 2003.
99.1 Press Release issued by Danielson Holding Corporation,
dated December 2, 2003, regarding the agreement to
acquire Covanta Energy Corporation.