Merisel reaches agreements in principle with debtholders to restructure debt; senior notes to convert debt to common stock; 10-K filed Monday.

EL SEGUNDO, Calif.--(BUSINESS WIRE)--April 14, 1997--Merisel, Inc. (NASDAQ:MSEL) Monday announced that it has reached an agreement in principle with holders of more than 75 percent of the $125 million principal amount outstanding of 12.5 percent Senior Notes to convert the notes to common stock.

The company has also entered into agreements in principle with the participating lenders in the Revolving Credit Agreement, 11.5 percent Senior Notes, and Subordinated Notes issued by Merisel Americas, Inc., the company's operating subsidiary.

Representatives of more than two-thirds of the Revolving Credit Agreement and 11.5 percent Senior Notes outstanding have agreed to extend their respective maturities to Jan. 31, 1999, subject to the consent of the remaining holders of outstanding debt and certain other conditions.

In consideration of the extension, Merisel has agreed to pay certain fees, as well as an interest rate increase of .5 percent per quarter in 1998 for each quarter the debt remains outstanding. As of Dec. 31, 1996, the company had $85.2 million in borrowings under its Revolving Credit Agreement, $56.8 million of 11.5 percent Senior Notes and $17.6 million of privately placed Subordinated Notes.

Under the terms of the agreement with the 12.5 percent noteholders and pursuant to the fulfillment of certain conditions, holders of the 12.5 percent Senior Notes would exchange their notes for 80 percent of the post-restructuring outstanding shares of common stock (or approximately 120.3 million shares of common stock based on the current 30.1 million shares outstanding).

Simultaneously, stockholders as of the exchange date would receive warrants to purchase common stock constituting 17.5 percent of the then-outstanding, post-restructuring common stock (representing approximately 26.4 million shares). The warrants will be exercisable for seven years from the exchange date and will be issued in two separately trading tranches of equal size with exercise prices based upon implied aggregate equity values of $215 million and $265 million, respectively. Based upon the number of shares currently outstanding, the exercise prices would be approximately $1.43 and $1.74 per share, respectively.

Because of the large number of shares to be issued in the exchange, the company may consider a reverse stock split, in which event the number of shares outstanding and the warrant exercise prices would be adjusted ratably.

When completed, the agreements will eliminate $125 million of parent company 12.5 percent Senior Note obligations, restructure approximately $155 million of operating company debt, amend certain covenants and enable the company to create an appropriate capital structure for its current business and potential growth.

``The proposed conversion of debt to equity not only strengthens the company's balance sheet significantly and avoids significant debt amortization required in mid- and late 1997, but it also will free up substantial amounts of cash which otherwise would have been used for interest payments. The anticipated increase in cash flow will be used to pursue our business plan,'' stated Dwight A. Steffensen, Merisel chairman and chief executive officer.

``We are extremely pleased to have reached satisfactory agreements in principle with our debtholders on such a rapid timetable. We believe that the debt restructuring will enhance the long-term equity value of the company and relieve Merisel from financial restrictions that have inhibited the company from achieving greater profitability.''

The exchange of debt for equity is subject to numerous conditions, including consent of the remaining debtholders of Merisel Americas to the extension of their indebtedness or a refinancing of the debt, and stockholder approval of an amendment authorizing the additional shares of stock. Stockholder approval would be sought at a meeting to be scheduled and held within the next few months.

In addition, the exchange offer of debt to equity will be conditioned upon approval of 100 percent of the holders of the parent company 12.5 percent Senior Notes. If approval cannot be obtained from all noteholders, the company and the consenting noteholders have agreed to complete the conversion of debt to equity through the filing of a prepackaged plan of reorganization under Chapter 11.

The holders of the requisite percentage of principal amount have already agreed to vote in favor of such a plan.

The prepackaged filing, should it be required, would involve only the parent company, Merisel, Inc., and would not affect vendor, customer or employee relations with the company's subsidiaries, Merisel Americas, Inc. and Merisel Canada, Inc., through which Merisel conducts virtually all of its distribution business.

The terms of the agreements in principle are included in the company's 1996 10-K, which was filed Monday. The 10-K filing is in line with the company's announcement on March 28 of a two-week extension.

Merisel, Inc. is a leading distributor of computer hardware, software and networking products. Through its subsidiaries, Merisel Americas, Inc. and Merisel Canada, Inc., Merisel distributes a full line of 25,000 products to more than 45,000 resellers throughout the United States and Canada.

Additional information can be obtained through the company's World Wide Web site (http://www.merisel.com) or by requesting information by fax at 310/615-6811.

CONTACT: Merisel, Inc., El Segundo

James Illson, 310/615-1295

Rivian Bell, 310/615-6812 or 310/615-6868

800/686-1910 (24-hour pager)