UPDATE 2-Headwaters gets covenant waiver, slashes FY outlook

* Cuts '09 EPS view to $0.00-$0.20/shr from $0.25-$0.40/shr

* Says to set up new asset-based revolver

* Lowers EBITDA view

* Shares down almost 9 percent (Adds details, analyst comments, share movement)

By Antonita Madonna Devotta

BANGALORE, June 29 (Reuters) - Headwaters Inc (HW.N) said it obtained a covenant waiver on its $227.5 million outstanding credit facility and slashed its 2009 profit view partially due to a hike in interest expense for the amendment.

The amendment provides a cushion to the company's total debt covenant and allows the set up of a new asset-based revolver to replace the current revolving credit facility that matures in September.

The amended debt agreement includes a waiver of the total leverage covenant for the quarter ending June 30, the supplier of building materials, coal combustion products and alternative energy said.

"Without this amendment, they were at risk of non-compliance with their covenants as soon as their September quarter," analyst Daniel Mannes of Avondale Partners said.

"They (also) had a maturity of their revolver in September and this gives them a lot of flexibility in terms of replacing it," he added.

On June 10, the company had said it could remain in compliance with or amend its debt covenants, adding that it had identified $100 million to $120 million in non-core assets that could be sold. However, no asset sales have been announced yet.

Headwaters said its current credit facility consists of a first lien term loan of $197.5 million and $30 million in borrowings under a revolving credit arrangement.

Under the terms of the amendment, the company has to repay $25 million of the term loan by Dec. 31, if the asset-based facility is closed.

"My guess is that ($25 million) will come out of the proceeds of an asset sale," analyst Mannes said.

The company said there may be a potential quarterly hike of 0.25 percent in the term-loan interest rate, from Jan. 1, 2010, until it makes principal repayments of at least $50 million on the first lien term loan.

"Given the current reticence of lenders to lend new money to companies... I think the asset-based loan is probably one of their few choices," Mannes added.

2009 OUTLOOK SLASHED

For the full year ending Sept. 30, the company forecast earnings in the range of breakeven to 20 cents per share, excluding a goodwill impairment charge.

On May 5, Headwaters forecast a profit of 25 cents to 45 cents per share, excluding items, lower than their prior estimate of 35 cents to 70 cents.

Headwaters also lowered its earnings before interest, tax, depreciation and amortization (EBITDA) view to a range of $110 million to $120 million.

The company had earlier forecast EBITDA of $135 million to $145 million, including the possibility of additional convertible note exchanges in the second and third quarters, which it no longer thinks necessary after the amendment.

Shares of the South Jordan, Utah-based company fell almost 9 percent to touch a low of $3.41, before recouping some losses to trade down 5 percent at $3.56 Monday on the New York Stock Exchange. (Editing by Gopakumar Warrier, Himani Sarkar)