Whitehall's Lenders Impose Borrowing Limitations; Newcastle Deal Unlikely

The Whitehall/Newcastle saga thickens, with Whitehall claiming that, despite their best efforts, Newcastle have failed to engage in productive negotiations with them. This latest pronouncement comes within a release from Whitehall announcing that their senior lenders imposed a $5 million discretionary reserve effective January 18 and will impose an additional discretionary reserve of $5 million effective January 24.

The reserves limit the amount the company is able to borrow under its Senior Credit Agreement, prompting Whitehall to announce that it has reviewed its financial situation and unless a $50 million financing deal is concluded with another potential investor -Prentice/Holzman-, they will be forced into bankruptcy. The company also cites Newcastle for their financial situation.

Whitehall claims that despite Newcastle's public announcements to the contrary, they have engaged in a serious on-going attempt to negotiate the final terms of the tender offer and merger agreements with them. They say that in spite of their public pronouncements, Newcastle has failed to follow through and engage in productive negotiations with them.

"In a January 11 letter and subsequent SEC filing, Newcastle claimed that its deal could be negotiated and documented within 48 hours. However, despite the continuing efforts and initiatives of the Company's Board and 

management, Newcastle has not only failed to provide first drafts of the key documents it needs for its proposal, but also has not produced a revised draft of the merger agreement in response to the Company's comments provided to Newcastle five days ago. In essence, the Company is no closer to a transaction with Newcastle than it was when this process began. Newcastle has once again failed to live up to its public pronouncements to provide a real alternative deal, claims the statement."

The release accuses Newcastle of "seeking only to gain control of the Company Board, after which there will be no assurance whatsoever that Newcastle will consummate its tender offer or any other transaction for the benefit of stockholders."

The release clearly favors the Prentice deal over the Newcastle proposal and recommends that stockholders vote for Prentice deal at a special meeting on January 25. The company goes so far as to recommend that even stockholders who have already voted in favor of Newcastle revoke their proxy and vote for Prentice.

The release also details Whitehall's objections to the Newcastle offer. Titled ‘Once Again, Newcastle Does Not Deliver On Its Proposal’, several points are made, including: “Newcastle has not delivered agreements to replace the Prentice bridge loan and senior credit facility,” or “delivered a final form of its proposed merger agreement”.