(Nov. 10)

Builders FirstSource has entered into an agreement to settle a class action lawsuit over its proposed recapitalization plan. The settlement, announced Nov. 9, is subject to the approval of a Delaware court.

Four of the company’s shareholder groups, including Robotti & Co. and  Ravenswood Investments, sued the pro dealer over a proposed recapitalization plan filed with the Securities and Exchange Commission on Sept. 1.

The proposed debt swap, brought forth by majority shareholders JLL Partners and Warburg Pincus, aimed to raise cash but could also dilute the holdings of minority shareholders, who sued to block its implementation. They claimed that JLL and Warburg, who designed the plan to benefit themselves, were abusing their power as controlling stockholders.

The recapitalization plan, as described in the initial filing with the SEC, included a $75 million offering to existing stockholders at $2 per share; a $98 million debt exchange, also at $2 a share, plus remaining notes -- roughly $275 million -- swapped for new notes, equity or both.

That plan was later amended on Oct. 23 to a $205 million common stock rights offering with $75 million devoted to general corporate purposes. The remainder would become outstanding notes due in 2012, with JLL and Warburg holding a $98 million stake in the notes.

A Delaware judge consolidated the four lawsuits in one class action case on Sept. 18.

As per the negotiated settlement, JLL and Warburg Pincus will purchase shares of common stock from Builders FirstSource at $3.50 per share; the gross proceeds of the rights offering that Builders FirstSource expects to conduct in connection with the recapitalization will be no less than $75 million; and JLL and Warburg will each exchange up to $48.9 million aggregate principal amount of notes held indirectly by each of them in a debt exchange.

Furthermore, to the extent gross proceeds of the rights offering are less than $205 million, JLL and Warburg Pincus will exchange notes for shares of common stock at $350 a share or whatever is the current exchange rate.

If approved, the settlement may not end the legal woes of Builder FirstSource. A shareholder group called Stadium Capital Management, which filed a lawsuit in late September to block the recapitalization plan, is not a part of the settlement group. Stadium, which owns 14.9% of the Dallas-based pro dealer’s stock, filed a letter with the SEC on Oct. 30, objecting to both the recapitalization plan and any potential settlements.