Pirelli fails to garner needed support to amend 1.75% notes due 2019

By Susanna Moon

Chicago, Sept. 22 – Pirelli International plc said its holders opted to pass on amending its €600 million of 1.75% notes due 2019.

At the meeting held Sept. 10 in London, there was representation from holders of about 78.1% principal amount of the outstanding notes, according to a company notice.

Of those cast, 49.9% of the votes were in favor of the proposed amendment and, as a result, the company failed to meet the three-fourths threshold needed.

As announced Aug. 13, Pirelli & C. SpA also is soliciting consents to amend its €500 million of 5.125% notes due 2016.

The meeting for the 5.125% notes will be held Sept. 24 in Milan.

In order to pass, each company needs votes from at least three-quarters of eligible noteholders. In order to form a quorum, at least half the principal amount of notes must be represented at each meeting.

Each issuer is seeking to modify the note terms in connection with the expected takeover by China National Chemical Corp., according to a previous notice.

Pirelli previously said the aim was to “actively manage the potential impact of the transaction” in order to limit the circumstances in which it would have to prepay the debt.

In particular, the company is seeking to prevent an event of default or a change of material shareholding put event.

However Pirelli wishes to give bondholders the right to put the 1.75% notes to the extent that Pirelli is merged and is not the surviving entity.

Specifically, the resolutions include language to:

• Confirm that no change of material shareholding and a related put event shall be deemed to have occurred in connection with the transaction;

• Direct the trustee, Deutsche Trustee Co. Ltd., to waive all potential events of default or any other breach of the trust deed that may occur in connection with any part of the transaction;

• Discharge the trustee from any liability suffered in respect of any act or omission it may have become or may become liable for under the notes documents, the amendment documents or in connection with the extraordinary resolutions; and

• Grant the deputy chairman of Pirelli’s and of Pirelli Tyre SpA’s boards of directors full power to execute any documents and to take any actions required by law in any modification or amendments of the supplemental trust deed.

Holders who deliver consents will receive a consent fee of 50 basis points for the 1.75% notes and 35 bps for the 5.125% notes if the amendments are passed.

Consents needed to be delivered by 11 a.m. ET on Sept. 7 for the 1.75% notes and 11 a.m. ET on Sept. 14 for the 5.125% notes.

Barclays Bank plc (+44 20 3134 8515 or eu.lm@barclays.com) and Societe Generale (+44 20 7676 7579 or liability.management@sgcib.com) are the solicitation agents.

Lucid Issuer Services Ltd. (+44 207 704 0880 or pirelli@lucid-is.com) is the tabulation agent.

Georgeson Srl (+39 06 42171 721 or proxy@georgeson.com) is the information agent.

Based in Milan, Pirelli is a tire company with a presence in more than 160 countries.

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