Advanced Environmental Recycling Technologies Inc. announced Monday it had restructured itself through a deal in which an affiliate of H.I.G. Capital LLC took preferred equity and debt securities in the Arkansas-based building materials make in exchange for extinguishing AERT debts to H.I.G. that had been in default and by investing another $5.5 million into the company.
The transaction means that H.I.G. has become AERT's largest shareholder with an approximately 80% ownership stake on a fully-diluted basis, Boston-based H.I.G. said in a news release issued Monday.
"AERT has fought through some really tough times over the last couple of years, especially in the face of less than favorable economic conditions," AERT chairman Joe G. Brooks said in a company-issued statement. "Despite making strides in our business, the weak economy and other factors put significant financial stress on the company and created liquidity challenges which escalated throughout the fall and winter. As such, the company has been exploring and carefully evaluating all strategic options available for it and its shareholders."
In February, AERT posted in an SEC filing a net loss of $2.1 million in the quarter ended Sept. 30, roughly half its loss in the year-earlier quarter. This came even though sales shrank to $16.2 million from $19.1 million. Through the first nine months of 2010, its net loss stood at $1.2 million, an improvement from its $4.4 million loss for January through September 2009. Here as well, sales shrank, to $55.8 million in the first three quarters of 2010 from $57.8 million in the year-earlier period.
The in-default bonds that AERT owed to H.I.G. date to 2007 and 2008. The AERT news release didn't provide a value or volume of the debt securities that H.I.G. got from AERT, but did say they significantly reduced AERT's outstanding debt obligations. As for the $5.5 million in additional investment, that money will be used "to meet outstanding vendor obligations, further pay down debt, and fund transaction expenses and extended the maturity of and reduced the interest rate on its existing loan," AERT said.
AERT's product line includes the ChoiceDek brand, which is sold at Lowe's, as well as the MoistureShield brand sold to independent LBM dealers nationwide.
"With the economy appearing to stabilize and strengthen, it is time for AERT to move forward from the financial challenges of the past and focus on achieving our short- and long-term goals while continuing to develop innovative products for its customers," Brooks said. "We believe our partnership with H.I.G., along with the strength, assistance, and guidance of the H.I.G. team of professionals, is a real positive for AERT and our stakeholders. We look forward to working with the H.I.G. team going forward."