Thailand's G Steel details debt repayment plans; unit gets standstill

By Caroline Salls

Pittsburgh, March 29 - G Steel Public Co. Ltd.'s board of directors has indicated its full support of a plan to seek approval to offer a program to existing creditors for repayment of the face value of the company's debt outstanding at Dec. 31, according to a company news release.

G Steel said the board's approval is consistent with the company's continuing efforts to recapitalize and reposition its balance sheet.

The company said this offer could include the issuance of new shares through a debt-to-equity conversion program.

To the extent the company reaches an agreement with its creditors and all other necessary agreements are put in place, G Steel said the debt payment program would be subject to shareholder approval, the completion of a special audit and any other necessary approvals.

The company said it may increase its registered capital by issuing new shares with the par value of Baht 1.00 per share to debtholders, comprised of 3.188 billion shares to settle $170 million of outstanding unsecured notes due 2010 and 5.663 billion shares to settle $300 million of trade payable debt.

Based on the Baht 0.37 closing price of the company's shares on the Stock Exchange of Thailand as of March 25, G Steel said the resulting conversion price for the debt payment program allows for an estimated recovery to creditors of at least 20% per Baht of debt.

G Steel said the creditors benefitting from the debt payment program would need to agree to some restrictions for 30 months to minimize the impact of any dilution.

Under the restrictions, all newly issued shares will be restricted from sale or transfer until the expiration of the holding period; all newly issued shares will be non-voting until expiration of the holding period; and all newly issued shares will benefit from a company guarantee that allows for the estimated 20% recovery before the holding period expires.

In addition, the company said the debt payment program gives creditors the opportunity to ultimately receive 100% recovery of their debt at the expiration of the holding period via the potential appreciation of the company's shares.

To the extent allowed by law, the company said it could repurchase, retire or accelerate the expiration of the holding period so the total consideration provided to creditors by that expiration date would be below 20% of the debt.

Subsidiary standstill

G Steel subsidiary Oriental Access Co. Ltd. has fulfilled the conditions needed to trigger a standstill agreement in connection with principal repayment defaults on its $120 million loan agreement.

G Steel said the subsidiary did not make the $15 million loan principal repayment due on April 30, 2009, which left the $63 million outstanding on the loan immediately due and payable.

The standstill was granted by Oriental Access' two overseas lenders.

The subsidiary owes $55 million on the loan following the lenders' enforcement of a third-party pledge.

Under the standstill agreement, the lenders have agreed to waive all existing defaults under the loan agreement, and the subsidiary has agreed to make a $10 million principal repayment by May 1 and a $20 million principal repayment by Sept. 1.

Also under the agreement, the final maturity of the loan will be Jan. 3, 2011, provided that Oriental Access meets its standstill obligations.

On the maturity date, the subsidiary is due to make the final $25 million principal repayment, in addition to paying all outstanding interest and fees.

According to the release, G Steel and the subsidiary are exploring means of repayment of the remaining amounts owed under the loan via potential new strategic investors and/or new loans with financial institutions.

The company said two third parties have pledged their share ownership positions in support of the loan agreement.

Before reaching the standstill agreement, the subsidiary's lenders enforced one of those third-party pledges, resulting in the lenders' forced sale of one pledgor's 850 million shares of G Steel.

The result of the pledge enforcement was an $8 million reduction of the principal balance owed under the loan, in addition to about $4 million of interest and fees, resulting in the $55 million balance.

G Steel said the subsidiary is now in discussions with the affected third-party pledgor concerning appropriate return of the pledgor's property when Oriental Access' financial condition improves.

G Steel is a Bangkok-based integrated hot-rolled coil steel manufacturer.

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