JLL, Warburg Propose Recap for Builders FirstSource

NEW YORK (Reuters) – Two large private equity investors in Builders FirstSource Inc (BLDR.O) on Tuesday unveiled a plan to recapitalize the money-losing provider of residential construction products, saying changes are needed to position it for a housing market recovery.

Funds run by JLL Partners Inc and Warburg Pincus, which together own 49.9 percent of Builders according to Thomson ShareWatch, want the Dallas-based company to conduct a $75 million rights offering at $2 per share.

They also want Builders to swap $98 million of notes maturing in 2012 that they own into common stock at the same price. Holders of the remaining 2012 notes would have the right to swap them for new notes, equity or a combination.

JLL and Warburg said the transactions would reduce Builders’ debt by $150 million to $172 million and add $75 million of cash before costs.

They said a special committee of independent directors would consider a recapitalization, which would need approvals of shareholders and holders of most of the other 2012 notes.

JLL and Warburg said they are committed to remaining “substantial investors” in the company and were not interested in selling their shares now.

Builders did not immediately return a call seeking a comment. In July, the company said it lost $53.2 million in the January-to-June period, or $1.48 per share.

Builders’ shares closed Monday at $7.69 on the Nasdaq. (Reporting by Jonathan Stempel, Editing by Maureen Bavdek)