6th Jan 2010 10:36
OAO TMK ANNOUNCES A CONSENT SOLICITATION IN RELATION TO THE OUTSTANDING U.S.$600,000,000 10.00 PER CENT. LOAN PARTICIPATION NOTES DUE 2011 ISSUED BY TMK CAPITAL S.A. OF WHICH U.S.$ 186,700,000 IS CURRENTLY OUTSTANDING (ISIN: XS0373732063)
6 January 2010
Overview
OAO TMK ("TMK") announced today its invitation to holders of the outstanding U.S.$600,000,000 10.00 per cent. Loan Participation Notes due 2011 (the "Notes") issued by TMK Capital S.A. for the sole purpose of financing a loan to TMK which is unconditionally and irrevocably guaranteed by OAO Volzhsky Pipe Plant, ZAO TMK Trade House, OAO Seversky Tube Works, OAO Sinarsky Pipe Plant, OAO Taganrog Metallurgical Works and IPSCO Tubulars Inc., to vote in respect of an Extraordinary Resolution in respect of their Notes, subject to the terms and conditions set out in the Solicitation Memorandum dated 6 January 2010 (the "Solicitation Memorandum").
Capitalised terms used in this announcement have the meanings ascribed to them in the Solicitation Memorandum.
Background to the Proposal
In July 2009, TMK invited Noteholders to consent to certain amendments to the Loan Agreement, Loan Guarantee and related amendments to each Loan Guarantor Deed of Accession in light of the worsening of world macroeconomic and market conditions and corresponding challenges to the world global and Russian pipe industry (including a decline in overall pipe demand). The purpose of the initiative was to increase TMK's financial flexibility to allow it to (i) continue to execute its current growth strategy and (ii) refinance existing indebtedness over the remaining term of the Notes. Noteholders approved the amendments with over 89 per cent. of the notional amount outstanding voting in favour of the extraordinary resolution which formally proposed the amendments and the amendments were effected on 6 August 2009.
The Consent Solicitation is being undertaken to modify and clarify certain covenants as TMK wishes to make such additional modifications to complement the amendments effected on 6 August 2009 in order to (i) continue to execute its current business development strategy and (ii) further enhance TMK's flexibility to implement its refinancing plan in respect of TMK's existing indebtedness.
Amendment to Refinancing Indebtedness
In July 2009, TMK stated that it might turn increasingly to raising debt capital on a secured basis in the local Russian markets over the remaining term of the Notes in order to refinance its near-term debt (portions of which may be unsecured debt). Therefore, TMK, through the previous amendments, changed one of the debt carve-out baskets (the basket set out under paragraph (s) of the definition of Permitted Liens (as defined in the Loan Agreement)) to increase the permitted aggregate principal amount outstanding of secured Indebtedness of the Borrower or any Subsidiaries of the Borrower at any one time allowed for under this basket from 15 per cent. to 40 per cent. of the total assets of the Group. To allow TMK to better utilise this amendment, TMK is seeking to remove the requirement from Refinancing Indebtedness that any Refinancing by the Borrower or any Subsidiary of the Borrower shall rank pari passu or be subordinated to the same level of the original Indebtedness (subject to compliance with the amendment above).
Additionally, the current definition of Refinancing Indebtedness requires that such Refinancing Indebtedness be Incurred at the same Group entity at which the existing Indebtedness to be refinanced is Incurred. There may be opportunities, however, for the TMK Group to raise Refinancing Indebtedness on more favourable terms at the level of its various subsidiaries (or combination thereof), as opposed to, raising Refinancing Indebtedness at the same level as at which the existing Indebtedness to be refinanced was incurred. As a result, TMK is seeking to amend the definition of Refinancing Indebtedness such that TMK may refinance existing Indebtedness from anywhere within the Group so long as Consolidated Indebtedness does not increase.
Finally, TMK believes that the Loan Agreement in its current form permits TMK certain flexibility in that Refinancing Indebtedness may be Incurred for a short period prior to either before or after the existing Indebtedness to be refinanced is actually being retired. TMK is seeking through the current Consent Solicitation to clarify that this period is up to five Business Days.
Amendment to Permitted Indebtedness
Over the term of the Notes, TMK expects to exercise agreements (many of which are Euro denominated and constitute Purchase Money Indebtedness) mainly for purchasing plant or installing equipment for use in the business of the Group. These agreements allow TMK to continue to execute its previously announced capital improvement plangrowth strategy despite a currently less favourable economic and operating environment. The debt financing arrangements to be entered into in connection with these agreements would constitute Purchase Money Indebtedness. As such, TMK is seeking to increase the aggregate principal amount of such similar types of indebtedness permitted under the debt carve-out basket outlined in paragraph (h) of the definition of Permitted Indebtedness (as defined in the Loan Agreement) from U.S.$70 million to €70 million.
TMK is also seeking to clarify that the Loan Agreement permits TMK the flexibility to repay, prepay, redeem or otherwise retire Indebtedness Incurred pursuant to paragraph (i) of the definition of Permitted Indebtedness (with the U.S.$100 million indebtedness carve-out basket) at any time, and any principal amount so repaid, prepaid, redeemed or otherwise retired shall reduce the principal amount of Indebtedness Incurred pursuant to paragraph (i) of the definition of Permitted Indebtedness. This is reflected by the proposed amendments made to paragraph (b) and paragraph (i) of the definition of Permitted Indebtedness. TMK believes the Loan Agreement already provides this flexibility, but wishes to make this explicit in the Loan Agreement.
Amendment to Incurrence of Indebtedness
Since the Notes were issued, TMK has experienced instances in which Indebtedness Incurred (or any portion thereof) meets the criteria of more than one of the types of Indebtedness described in Clause 14.2 (Incurrence of Indebtedness) or the definition of Permitted Indebtedness (each contained in the Loan Agreement). Currently, TMK is only able to classify such Indebtedness Incurred as a single type and, once classified, is unable to change such classification. This limits TMK's ability to efficiently utilise the flexibility already provided to it under the Loan Agreement, including the classification of debt as Refinancing Indebtedness and debt within certain baskets of Permitted Indebtedness, both provided for in the definition of Permitted Indebtedness. Therefore, TMK is seeking to insert a "reclassification clause" to Clause 14.2 (Incurrence of Indebtedness) of the Loan Agreement to allow TMK (at any time) the ability to reclassify Indebtedness Incurred (or any portion thereof) which meets the criteria of more than one of the types of Indebtedness that it meets the criteria of , thereby achieving a more efficient classification of the company's existing Indebtedness.
Amendment to Section 3.12(a) B of the Loan Guarantee relating to U.S. Assets
In July 2009, TMK stated that the U.S. steel market may might improve over the remaining term of the Notes thereby resulting in opportunities for the TMK Group to raise debt capital on more favourable terms at the level of its U.S. Subsidiaries with U.S. financing counterparts, as opposed to, raising debt capital at the Group level. As a result, with the above-mentioned Noteholder approval, TMK amended the covenant in the Loan Guarantee restricting limitations of dividends and other payments and certain other covenants in the Loan Guarantee affecting its U.S. Subsidiaries which guarantee TMK's obligations under the Notes to potentially allow for financing in the U.S. high yield market at the level of these and future U.S. Subsidiaries. These amendments were made with the intention of complying with any future "restricted payments" clause and "asset sales" clause (common provisions in U.S. financing packages for issuers with similar credit ratings as the Notes) which may be included as terms of such U.S. Subsidiary's financing. In line with this goal, TMK is seeking amendments to broaden its ability to agree to limitations on distributions within the Loan Guarantee of its U.S. assets so that TMK may continue to evaluate opportunities to raise debt capital on terms that are more favourable at the level of its U.S. Subsidiaries.
Instruction Fees
Subject to the passing of the Extraordinary Resolution, (i) Noteholders who deliver an Electronic Voting Instruction in favour of the Extraordinary Resolution (and do not validly withdraw or revoke it) on or prior to the Early Instruction Deadline of 4.00 p.m. (London Time) on 15 January 2010, will receive the Early Instruction Fee of U.S.$ 750 per U.S.$ 100,000 principal amount of Notes no later than the fifth Business Day after the Approval Date and (ii) Noteholders who deliver an Electronic Voting Instruction in favour of the Extraordinary Resolution (and do not validly withdraw or revoke it) after the Early Instruction Deadline and on or prior to the Late Instruction Deadline of 4.00 p.m. (London Time) on 24 January 2010, will receive the Late Instruction Fee of U.S.$ 375 per U.S.$ 100,000 principal amount of Notes no later than the fifth Business Day after the Approval Date.
It is a condition (waivable by TMK) of TMK's obligation to pay the Early Instruction Fee and the Late Instruction Fee, as the case may be, in respect of Notes subject to an Electronic Voting Instruction that the Extraordinary Resolution has been passed at the Meeting.
Noteholders who submit Electronic Voting Instructions after the Early Instruction Deadline will not be eligible to receive the Early Instruction Fee and Noteholders will not be eligible to receive either the Early Instruction Fee or the Late Instruction Fee if they vote against the Extraordinary Resolution or if they do not vote at all.
Meeting of Noteholders
The Meeting of Noteholders shall take place at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ at 4.00 p.m. (London time) on 28 January 2010.
Expected timetable
|
Event |
Date |
||
|
Announcement of Proposal and Notice of Meeting given to Holders through the Clearing Systems. |
6 January 2010 |
||
|
Solicitation Memorandum to be made available to Holders via the Clearing Systems and at the specified office of each of the Lead Solicitation Agent, the Solicitation Agent, the Tabulation Agent and the Principal Paying Agent (copies of which are obtainable by Holders, upon request, free of charge). |
6 January 2010 |
||
|
Early Instruction Deadline: Latest time and date for delivery of valid Electronic Voting Instructions voting in favour of the Proposal through the Clearing Systems to receive the Early Instruction Fee (Electronic Voting Instructions validly submitted by this date are irrevocable (other than in the limited circumstances set out under the heading "Procedures in connection with the Consent Solicitation - Amendments")). |
4.00 p.m. (London Time) on 15 January 2010 |
||
|
Late Instruction Deadline and Expiration Time: Latest time and date for delivery of valid Electronic Voting Instructions voting in favour of the Proposal through the Clearing Systems to receive the Late Instruction Fee (such Electronic Voting Instructions are irrevocable (other than in the limited circumstances set out under the heading "Procedures in connection with the Consent Solicitation - Amendments") from this date) No Late Instruction Fee shall be payable in respect of the Notes which are the subject of any Electronic Voting Instruction revoked prior to this date which are not subsequently re-delivered prior to this date. No Instruction Fees shall be payable in respect of valid Voting Instructions delivered after the Late Instruction Deadline. |
4.00 p.m. (London Time) on 26 January 2010 |
||
|
Latest time and date for obtaining a form of proxy from the Registrar and for the issuance or revocation of a voting instruction given other than by way of an Electronic Voting Instruction. |
4.00 p.m. (London Time) on 26 January 2010 |
||
|
Time and date of the Meeting. |
4.00 p.m. (London Time) on 28 January 2010 |
||
|
Notice of results of the Meeting to be given to Holders. |
28 January 2010 |
||
|
If the Extraordinary Resolution is passed at the Meeting: |
|||
|
Payment of Instruction Fees to Holders who have submitted valid Electronic Voting Instructions in favour of the Proposal by the Early Instruction Deadline or the Late Instruction Deadline as the case may be. The Extraordinary Resolution will only become effective when such payment is made. |
No later than the fifth Business Day following the Approval Date |
For further information:
A complete description of the terms and conditions of the Proposal and the Consent Solicitation will be set out in the Solicitation Memorandum. Further details on the transaction can be obtained from:
The Solicitation Agents:
Lead Solicitation AgentUBS LimitedAttn: Mark T Watkins Tel: +44 20 7567 0525 Email: [email protected]
Solicitation AgentVTB Capital plc Attn: George Niedringhaus Tel: +44 20 3334 8333 Email: [email protected]
Holders may obtain copies of the Solicitation Memorandum from:
The Tabulation Agent Lucid Issuer Services Limited Attn: Lee Pellicci/David Shilson Tel: +44 20 7704 0880 Email: [email protected]
Related Shares:
TMKS.L