Pulse Electronics Announces Recapitalization on $102.7 Million Oaktree Investment

Pulse Electronics Corporation (NYSE:PULS) announced that is has entered into definitive agreements with certain affiliates of investment funds managed by Paul, Weiss client Oaktree Capital Management, L.P., an affiliate of Oaktree Capital Group, LLC (NYSE: OAK) to recapitalize Pulse with a debt and equity investment by Oaktree of approximately $102.7 million.

At closing, Pulse intends to use the proceeds to repay $55 million outstanding under its senior credit agreement with its existing lenders and use $20 million for working capital and general business purposes. In addition, Oaktree has agreed to exchange $27.7 million of the company's $50 million in outstanding 7% Senior Convertible Notes due 2014. In exchange, Pulse will issue to Oaktree an amount of shares of Pulse common stock, which, along with any other common stock Oaktree already owns, will represent approximately 49 percent of the outstanding Pulse common stock, and a warrant to purchase 19.9 percent of a wholly owned subsidiary of Pulse. The warrant will terminate upon issuance of the new Pulse preferred stock described below. The recapitalization will occur in reliance on the New York Stock Exchange's financial viability exception, and Pulse expects that the Oaktree transactions will substantially resolve its liquidity constraints and enable it to continue its pursuit of growth. Pulse expects these transactions to close on or around November 19, 2012. 

Following the closing Pulse will seek an amendment to its charter to authorize an increase in the number of its authorized shares of common stock and the issuance of a new series of non-voting preferred stock to Oaktree.  Pulse will also conduct an exchange offer in respect of its 7% Senior Convertible Notes. The new Pulse preferred stock will automatically convert into additional shares of Pulse common stock upon discharge of these senior convertible notes. Oaktree would then hold approximately 64.38% of the equity of Pulse (on a fully diluted basis immediately following the anticipated November 19, 2012 closing, and without giving effect to shares of common stock and warrants Oaktree owns prior to these transactions).

The Paul, Weiss team advising on these transactions included, among others, bankruptcy partner Elizabeth McColm; corporate partner Kenneth Schneider; employee benefits partner Robert Fleder; finance partners Eric Goodison and Valerie Radwaner and counsel Dorian Fogel; litigation partner Andrew Ehrlich; and tax partner Richard Bronstein.