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April 16, 2002 02:00 AM

Heafner cuts debt, increases capital in two moves

Tire Business Staff
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    CHARLOTTE, N.C. (April 16, 2002)— Heafner Tire Group Inc., the largest independent distributor of tires and tire-related products in the U.S., has made two separate moves to reduce debt and free up capital. A company spokesman said one move had nothing to do with the other.

    “They're two separate transactions,” the spokesman said after Heafner announced that the investment banking firm of W.P. Carey & Co. acquired three warehouse facilities from Heafner Tire Group Inc. and then leased them back to the company.

    In the initial move, announced April 12, Heafner completed a buy-back of up to $126 million in bonds originally tendered in February. The final $121.4 million was retired in a move that increases shareholder equity. Heafner President and CEO Dick Johnson said the move gives the company greater financial flexibility.

    Heafner purchased $121.4 million of its 10-percent senior notes, due 2008, through a modified Dutch auction procedure for a $535 per $1,000 principal amount, plus accrued but unpaid interest, the company said. The tender offer, amended March 11, reduces Heafner´s long-term debt by 32 percent, according to Heafner, and will reduce the company´s annual interest expense by nearly $8 million.

    The debt retirement increases shareholder equity, including redeemable preferred stock, by approximately $59 million to $18 million, marking the first time Heafner's shareholder equity has been positive since 2000.

    “I´m pleased that we have been able to accomplish one of my top goals: to boost shareholder equity back into positive territory,´” Mr. Johnson said. “This debt reduction strengthens the company and gives us greater financial flexibility to better serve our customers.”

    According to the terms of the agreement with W.P. Carey, the three warehouses will be leased to Heafner under a 20-year net lease. Located in Lincolnton and Charlotte, N.C., and Greenville, S.C., the facilities total more than 465,600 square feet of warehouse space.

    "This sale-leaseback transaction will effectively turn Heafner Tire´s real estate into working capital," Edward V. LaPuma, managing director of W.P. Carey, said.

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