Denali news & news releases                                                                                      

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R. Kevin Andrews
Chief Financial Officer
713-627-0933

Ken Dennard / kdennard@easterly.com
Lisa Elliot / lisae@easterly.com

Easterly Investor Relations
713-529-6600

	FOR IMMEDIATE RELEASE 00-05
	DENALI ANNOUNCES PROPOSED $28 MILLION INVESTMENT BY WILLIAM BLAIR MEZZANINE CAPITAL PARTNERS ALSO REPORTS PRELIMINARY THIRD QUARTER ESTIMATED RESULTS MAY 8, 2000 - HOUSTON, TEXAS - Denali Incorporated (NASDAQ:DNLI) today announced that it has signed a letter of intent with William Blair Mezzanine Capital Fund III, L.P. ("Blair") in which Blair proposes to invest $28 million in Denali. In exchange for its investment, Denali will issue Blair $11.2 million of 12% Senior Subordinated Notes due June 2008, $8.8 million of Convertible 12% Senior Subordinated Notes due June 2008, and $8 million of common equity consisting of approximately 1.8 million shares of common stock at a price of $4.40 per share. The Convertible Senior Subordinated Notes are convertible into 1,850,000 shares at $4.75 per share. The signing of a definitive agreement is contingent upon satisfactory completion of various conditions, including finalization of the investors' due diligence. In addition, certain directors and third parties have agreed to rollover approximately $4.3 million of subordinated debt which they currently hold and invest an additional $1.2 million in a combination of new convertible debt and equity on the same terms and pricing with Blair subject to completion of the Blair transaction. Proceeds of the investments noted above will be used to pay down existing bank debt and to repay the subordinated debt of the Company presently held by an institutional investor. Upon completion of a definitive agreement with Blair, the transaction will be submitted to shareholders for approval. A special shareholder meeting date is scheduled for June 23, 2000 with a shareholder record date of May 18, 2000. "We are very pleased by the confidence and support shown by Blair, our directors and certain other investors," stated Richard W. Volk, Denali's Chairman and CEO. "This agreement, when completed, will enable us to recapitalize Denali and provide us the financial flexibility to continue to pursue prudent opportunities and build shareholder value. We are also gratified that the completion of the agreement will satisfy the Company's previously reported obligation to its U.S. bank group on its domestic bank credit facility. Under that obligation, Denali was required to raise at least $7.5 million in equity before July 31, 2000 in order to reduce its leverage ratio related to this domestic-based senior debt." The Company also announced preliminary estimated results for the three month period ended April 1, 2000. Based on a preliminary review, estimated results of operations for the third quarter of fiscal 2000 should range from a loss of $0.29 to $0.31 per share, before restructuring charges. U.S. operations were below plan primarily due to a weak market for storage tanks in the U.S., which was partially caused by major oil company mergers. European operations were below plan primarily due to slowness in capital spending by European chemical companies as well as weakness in the Euro currency. Denali is scheduled to report actual third quarter fiscal 2000 results on May 16, 2000. Denali Incorporated, with pro forma trailing twelve month revenues of over $200 million, is a global provider of fluid handling products specializing in corrosion-resistant applications in process industries such as: chemical, power, pulp and paper, petroleum equipment, and water/wastewater. The Company manufactures engineered fiberglass-composite tanks, vessels, and piping systems, as well as steel, aboveground storage tanks. The Company also distributes a wide range of engineered products and systems. Headquartered in Houston, Texas, Denali Incorporated has over 20 manufacturing facilities in the United States, the Netherlands, Germany, the United Kingdom, Poland, France, and Chile and joint ventures in Venezuela and Thailand. For more information on the Company, please visit its Website at www.denaliincorporated.com. This press release does not constitute an offer of any securities for sale. The Company may elect not to register the equity securities that it is required to sell by the terms of its bank agreement amendment. The Company will not offer or sell any such securities in the United States absent registration or an applicable exemption from registration under applicable securities laws.   This news release contains certain forward-looking statements as such term is defined in the Private Securities Litigation Reform Act of 1995 and information relating to the company and its subsidiaries that are based on the beliefs of the company's management as well as assumptions made by and information currently available to the company management. When used in this report, the words, "anticipate", "believe", "estimate", "expect", and "intend" and words or phrases of similar import, as they relate to the company or its subsidiaries or company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. ###

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