Masonite Amends Credit Agreement and Extends Forebearance Agreement

Masonite International Inc. announced last week it entered into an amendment to its credit agreement and an extension of the forbearance agreement dated September 16, 2008, with its bank lenders. This extension provides the company time to develop a revised business plan for 2009, which will serve as the basis of its efforts to create an appropriate capital structure to support Masonite's long-term business objectives, according to a statement issued by the company.

As previously announced, as a result of its financial performance for the quarters ended June 30 and September 30, 2008, Masonite was not in compliance as of such dates with certain financial covenants contained in its credit facility, which constituted an event of default under the credit facility. The financial covenants relate to EBITDA metrics and reflect the challenging conditions in the U.S. housing industry. Masonite is engaged in ongoing negotiations with lenders that are party to the credit facility regarding a potential amendment to the terms of the credit facility.

There is no assurance that the negotiations with lenders will result in an amendment acceptable to Masonite and to its lenders, according to the company.

Pursuant to the amendment, which is effective November 25, 2008, neither the administrative agent nor the lenders will take action to accelerate the maturity of or terminate the company's revolving credit facility or to otherwise enforce payment of the company's obligations under the credit agreement, or exercise any other rights and remedies available to them under the credit agreement or applicable law, according to a press release issued by the company. The forbearance agreement applies to the non-compliance of the covenants as of June 30 and September 30, 2008. The forbearance agreement termination date is the earliest of December 19, 2008. The forbearance agreement can also be terminated if the company fails to deliver certain financial information by agreed upon dates, according to Masonite.

The amendment with the lenders provides for the December 19, 2008. deadline to be further extended to January 15, 2009, provided that Masonite: delivers a draft business plan by December 19, 2008; reviews the plan with the bank lenders by December 22, 2008; delivers a final business plan by January 15, 2009; and complies with a number of other provisions related to the negotiation of a consensual restructuring plan.

"We are pleased to reach this extension of the forbearance agreement with our bank lenders, which provides us with additional time to reassess our 2009 and longer-term business plans, given the rapidly changing economic environment," says Fred Lynch, president and chief executive officer of Masonite International Inc. "We intend to use this time to develop a solid and realistic business plan for 2009 and beyond, thereby providing us with the basis to negotiate an appropriate capital structure that will support our long-term strategic plans. With our excellent market position, strong brand and industry-leading products, we believe we are well-positioned to take advantage when the market rebounds. In the meantime, we remain focused on delivering the highest value door products to our customers around the world."

In addition, pursuant to the amendment, the company agreed to a 2 percent increase in the interest rate under the credit agreement which increase is payable in the form of additional indebtedness. As previously announced, on November 17, 2008, Masonite entered into a separate forbearance agreement with holders of a majority of the senior subordinated notes due 2015 issued by two of the company's subsidiaries. Under terms of the Bondholder Forbearance Agreement, which is effective through December 31, 2008, the noteholders executing the Bondholder Forbearance Agreement agreed that during such period they will not exercise rights and remedies against the company solely with respect to the company's failure to make the interest payment due on October 15, 2008.

Masonite also announced third-quarter 2008 sales of $453.2 million, a decline of 14.4 percent, compared to sales of $529.3 million in the third quarter of 2007. Operating EBITDA decreased 54.7 percent to $32.1 million from $70.8 million in the third quarter of 2007.

"Masonite's financial results in the third quarter reflect the extraordinary and unprecedented decline in the United States and other housing markets," says Lynch. "In response to these challenges, we moved aggressively to right-size our cost structure and business operations, while maintaining a clear focus on delivering the highest value door products to our customers around the world. We continue to work with our bank lenders and bondholders on developing an appropriate capital structure to support our long-term business objectives."

In the third quarter of 2008, net debt increased by $21.1 million as cash flow was negatively impacted by trade payables terms contraction of $18.1 million relating to Masonite credit concerns and $6.6 million relating to professional advisor and forbearance fees associated with pursuing an amendment to the company's senior secured credit facility. Excluding these onetime, unusual cash outflows, normalized cash flow was $3.6 million for the quarter. Sales to external customers from facilities in North America decreased 17.9 percent to $301.4 million in the third quarter of 2008 from $366.9 million in the third quarter of 2007. Sales decreased 17.8 percent in North America, excluding the impact of favorable foreign exchange movements.

Sales to external customers from facilities outside of North America, primarily in Western Europe, decreased approximately 6.5 percent to $151.8 million in the third quarter of 2008 from $162.4 million in the prior year period. Favorable foreign currency movements provided a $9.2 million positive impact on comparative consolidated sales ($1.2 million in North America and $8.0 million in the rest of world). Excluding the impact of favorable exchange rates, sales in the company's Europe and other segments decreased 11.5 percent during the prior year period due to deteriorating market conditions, in particular in the United Kingdom, as well as in some parts of Eastern
Europe.

Operating EBITDA decreased to $32.1 million in the third quarter of 2008 from $70.8 million in the third quarter of 2007 due in large part to lower sales volumes and input cost inflation that have not been fully offset by price increases nor lower selling, general and administration expenses of $10.3 million versus the prior period.

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