Titan plans new offer to issue convertibles, PIK notes for 8½% notes

By Angela McDaniels

Tacoma, Wash., June 8 - Titan Petrochemicals Group Ltd. has proposed a new exchange offer and consent solicitation for its $315.36 million outstanding principal amount of 8½% guaranteed senior notes due 2012, according to a company news release.

As previously reported, the company began an exchange offer for the notes in December and terminated it in April after failing to meet the minimum tender condition. Soon after, it announced plans for a new exchange offer with a lower minimum tender condition, but this was terminated in May.

In the latest offer, the company plans to offer new 0% convertible notes due 2015, new 8½% pay-in-kind notes due 2015 and cash in exchange for the 8½% notes.

For each $1,000 principal amount of notes tendered by the early tender time, holders will receive $376.00 principal amount of convertibles, $68.00 principal amount of PIK notes and $206.00 in cash.

For notes tendered after the early tender time, the cash amount will be $173.50. The principal amount of new notes to be received will be the same.

Titan will also solicit consents from the noteholders to proposed amendments that would eliminate substantially all of the restrictive covenants, all of the reporting requirements and some events of default in the indenture governing the notes.

Consents will be needed from holders of at least 70% of the notes in order to make the changes.

The early tender time will be 5 p.m. ET on June 21, and the exchange offer is expected to expire at 5 p.m. ET on July 6.

New notes terms

Up to $118,575,360 of the convertibles and up to $21,444,480 of the PIK notes will be issued in the offer. The cash amount to be paid will be $54.7 million to $65 million.

The company said the redemption amount at maturity will be $570 for each convertible and $103 for each PIK note. In each case, this is 151.621% of the principal amount at issuance and represents a yield of 8½% compounded semiannually.

The convertibles will have a conversion rate of 10,915 shares per $1,000 principal amount, which is equal to a conversion price of approximately $0.0916 per share and represents a premium of about 16.38%.

If all of the notes were converted, the resulting shares would represent 16.45% of the company's issued share capital.

Titan will be able to force conversion of the notes if the dollar equivalent of the closing share price of its stock is at least 130% of the conversion price for at least 30 consecutive trading days.

The convertibles will be callable at the higher of the amount that will result in a yield of 8½% and the net present value of the amount payable on maturity of the convertibles redeemed.

The PIK notes will be callable at par plus a premium.

The company has received approval in principle from the Singapore Exchange Securities Trading Ltd. to list both series of notes.

Offer conditions

The offer will be conditioned on the receipt of at least 70% of the outstanding principal amount of notes and the receipt of consents from the holders of at least a majority of the principal amount of outstanding notes not owned by Titan or its affiliates.

The company plans to use proceeds from a HK$370 million share subscription agreement with Moral Base Investment Ltd. to fund the exchange offer.

The obligation of Moral Base to purchase the shares is conditioned on, among other things, 70% of the 8½% notes being tendered. Moral Base also has the right to terminate the share subscription agreement if the conditions to the agreement's completion have not been satisfied by July 15.

The company warned that not receiving the expected funding from the equity placing would have an adverse impact on its ability to continue as a going concern.

Previous offers

In the most recently canceled offer, Titan planned to issue $376 of convertibles and $224 of PIK notes for each $1,000 principal amount of 8½% notes exchanged.

Those who tendered their notes for exchange could have elected to receive cash instead of the new notes in an auction process under which Titan expected to have $65 million available to pay out.

For each $1,000 principal amount of notes, the minimum price was going to be $640 and the maximum was going to be $800.

This offer had a 70% minimum tender condition.

In the prior offer, for each $1,000 principal amount of the existing notes, the company was offering $199 principal amount of new 8½% notes due 2015, 3,075 shares and $12.50 in cash.

That offer had a 90% minimum tender condition.

For the new offer, Goldman Sachs (Asia) LLC will be the global coordinator, lead arranger and co-dealer manager, and ING Bank NV, Singapore Branch will be the co-arranger and co-dealer manager.

Titan is a Hong Kong-based trader of petrochemicals and oil products.

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