By Mary Jo Feldstein

A revised financing package announced by Zoltek Cos. of Bridgeton may look like a less-than-stellar deal for stockholders, but Chief Executive Zsolt Rumy says the terms are a product of the company's leaner times.

Under the revised agreement, announced on Friday, a group of institutional investors will convert $20 million of debt issued in February 2005 into about 1 million shares of Zoltek stock. The investors also will exercise warrants to buy 1.05 million additional shares.

Zoltek makes carbon fibers used for a variety of purposes.

In trading Monday, shares of Zoltek gained 52 cents, or 2 percent, to close at $26.01. Based on that price, the investors' stake in the company would be worth $54.3 million.

That looks today like a generous return on the initial $20 million, but Rumy on

Monday said the investors had taken a big risk. The company's stock was

volatile and could have fallen.

"At that point, everybody was dumping on us, and they had confidence in us," Rumy said. "So they end up making a lot of money on it. They deserve it."

In the last 52 weeks, Zoltek shares have traded in a range of $8.03 to $31.15.

For Zoltek, the revised agreement ends Zoltek's need to use a particular type

of accounting that caused large fluctuations in the company's earnings.

Those swings led to similar movements in Zoltek's share price and confused individual shareholders, Rumy said.

But persuading institutional investors to covert their notes and warrants into shares required some concessions.

Zoltek will borrow an additional $30 million, including $10 million announced Friday. The investors, not Zoltek, wanted the company to borrow the additional money.

"They're making money on it," Rumy said of the lending agreements. "They have confidence the shares are going to be more valuable."

The additional $30 million of notes will be convertible into Zoltek stock at

$25.51 a share.

In addition to notes, Zoltek will issue to the investors five-year warrants to buy up to 411,521 shares at $28.06 a share, and up to 111,113 shares at a penny a share.

The warrants to buy stock at a penny a share were another concession to convince the investors to convert the previous debt.

William Gregozeski, an analyst with Capstone Investments in Milwaukee, said ending the complex accounting will make it easier to understand Zoltek's position.

But Gregozeski said he didn't understand why Zoltek agreed to give stock away at a penny a share. "I guess it was just what they had to give away," he said.