Clifden lacks tenders to set holding for class A notes, argues against boosting direction threshold

By Susanna Moon

Chicago, June 4 – Clifden IOM No.1 Ltd. said it failed to obtain the needed tenders to establish its required holding of £104 million of the class A secured floating-rate notes due 2017.

Clifden “is actively exploring certain options with a view to enabling it to reach the required holding, including acquiring notes in the secondary market on a delivery against payment basis brokered through one of the offeror's clearing banks,” according to a company notice.

The ad hoc group and the noteholders meetings have been scheduled for June 11.

As announced Feb. 20, Clifden was tendering for £413.7 million of class A secured floating-rate notes due 2017 and £29.8 million of class B secured floating-rate notes due 2017 issued by Fairhold Securitisation Ltd. in order “to establish a holding” for each series of notes.

The company said that on May 29 the issuer notified holders of a meeting to ask for amendments to the notes to raise to 50.1% from 25% the minimum percentage of class A or B holders required to give a direction to the trustee to take any proceedings, actions or steps.

Clifden is proposing to vote against the proposed changes for the following reasons:

• The reason for the amendment – that the ad hoc group is concerned with the note trustee receiving conflicting instructions from separate groups of noteholders – “is without foundation,” the release said;

• The threshold increase would be “contrary to market practice for transactions of a similar nature”; and

• If the measure passes, it would be more difficult for anyone “to take enforcement action in relation to the issuer and is therefore likely to have a material adverse effect on the market price of the notes,” the company said.

As a result, if the amendments are approved, the company said it “may withdraw its interest in pursuing restructuring and enforcement actions in respect of the issuer.”

Background

On May 1, an ad hoc group of Fairhold’s class A floaters and class B floaters said that none of them will take part in the tender offer being run by Clifden.

Then on May 3 Clifden IOM No.1 Ltd. said it amended its cash tender offer for the Fairhold notes that is set to run until noon ET on May 18.

For the class A notes tendered after May 3, the purchase price was amended to read 54.5, according to a previous update.

As of that notice, holders had tendered £40 million of the class A notes, which was short of the £104 million threshold needed to establish the required holding, the company had said. There is no required holding for the class B notes.

Clifden began tendering for the notes on Feb. 20 and amended the terms on March 21 so that for class A notes tendered after the early deadline, the purchase price was amended to read 1%. Originally, the purchase price was 40% with an early tender premium of 20%.

For the class B floaters, the purchase price will be 1% with an early tender premium of 4%.

There is no change to the purchase price for the class B notes, which remains 1%, the release added.

The early tender deadline also was extended to noon ET on March 28 from March 2.

The offers as most recently amended provide “a purchase price materially greater than the envisaged recovery (if any) from the issuer,” the company previously said.

The amendments also provide “certainty of execution,” an interim distribution to noteholders of 10% of par and a settlement date of no later than Sept. 28.

Clifden said, “If the issuer is required to pay amounts claimed by the issuer swap counterparties, net distributions to noteholders are likely to be materially less than the purchase price payable under the offers, and may be nil.”

More details

Clifden said that if it obtains the needed tenders to establish the required holding of class A notes, it would to direct the trustee to serve a note enforcement notice on the issuer and to enforce certain of the security for the notes.

Furthermore, the company is proposing to appoint an administrator of the issuer and a fixed charge receiver over the shares of Fairhold Finance Ltd.

Fairhold Equity Investments Ltd., an affiliate of the offeror, will acquire the shares of FFL from the fixed charge receiver for £1. Fairhold Credit Investments Ltd., also an affiliate of the offeror, will acquire the funding loans, the swaps and any cash at bank from the administrator of the issuer for a cash amount.

After the acquisitions, a “rationalization process” will be held by the offeror, which will involve the transfer of the freehold rights into a newly established subsidiary of FFL.

Afterward, the offeror will effect settlement of the notes accepted for purchase by Sept. 28. Fairhold Credit Investments Ltd. will guarantee settlement. In addition, after the acquisitions, holders of notes accepted for purchase will have direct recourse to Fairhold Finance Ltd. and to the property owners as an additional guarantee of settlement.

Morrow Sodali Ltd. (+44 20 3879 5462 or fairhold@morrowsodali.com) is the tender agent.

Fairhold noteholders respond

Together, the ad hoc group holds about 60% of the class A notes, more than 75% of the class B notes and 100% of the tranche C notes and I3 note HAS, the group said.

As a result, the ad hoc group now includes funds advised by Angelo, Gordon & Co., LP, by Avenue Europe International Management, LP, by CVC Credit Partners Investment Management Ltd. and by Hayfin Capital Management LLP.

“With the addition of new members to the ad hoc group, the supportive noteholders and the enhanced level of control, the ad hoc group is optimistic that progress can be made,” according to an announcement by the noteholders ad hoc group on Monday.

The ad hoc group and its advisers “are actively pursuing further plans and considering all options including enforcement. As part of these plans, it is anticipated that some or all of the ad hoc group may go private and become restricted from trading at the relevant time in the future,” the release noted.

The ad hoc group also is holding “close and regular dialogue with a number of other sizable class A noteholders who are supportive of the ad hoc group's approach” and together they hold more than 80% of the class A notes, the release added.

For questions, contact glen.cronin@rothschild.com or +44 20 7280 5506, richard.tett@freshfields.com or +44 20 7832 7627, simon.lalande@rothschild.com or +44 20 7280 1589 or christopher.barratt@freshfields.com or +44 20 7832 7101.

Fairhold Securitisation is incorporated in the Cayman Islands.

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