US Georgia Gulf disputes claims of default

09 June 2008 16:37  [Source: ICIS news]

HOUSTON (ICIS news)--US polyvinyl chloride (PVC) producer Georiga Gulf has filed a court complaint denying allegations made by bond holders that the company was in default, it announced on Monday.

Georgia Gulf filed the complaint in the state court of Delaware. The company seeks a declaration from the court stating it is not in default.

Creditors on Friday delivered a letter accusing Georgia Gulf of defaulting on bonds issued on 3 December 2003.

Certain bond holders claimed the amount of the company's debt exceeds levels stipulated in the covenants.

Georgia Gulf and the bond holders have disputed the default since at least 8 May, according to both groups.

If Georgia Gulf is found to be in default on the notes, the notice would set off a 30-day deadline to resolve the excessive debt, the company said. After that period, bond holders could seek to enforce the debt.

A default could also have a domino effect, causing the company to default on a credit agreement dated 3 October 2006, Georgia Gulf said.

If Georgia Gulf defaults under that agreement, creditors could end any commitments to make further loans, the company said. Creditors could also demand that Georgia Gulf immediately pay off the loans.

Georgia Gulf's earnings have been dragged down by weak demand for PVC, caused by the downturn in the US housing market.

In addition, Georgia Gulf acquired Royal Group Technologies for $1.6bn (€1bn) in 2006. Royal Group derives most of its business from residential construction.

Georgia Gulf shares were trading at $5.01 on the New York Stock Exchange, down 1.57%.

($1 = €0.63)

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By: Al Greenwood
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