Mexico’s Latina Offshore begins consent solicitation for 8 7/8% bonds

By Angela McDaniels

Tacoma, Wash., Oct. 11 – Latina Offshore Ltd. began a consent solicitation for its 8 7/8% senior secured callable bond issue 2013/2018, according to a bondholder notice from bond trustee Nordic Trustee ASA.

The issuer said it has been in discussions “for some time” with an ad hoc committee of bondholders about potential amendments to the bond agreement in light of its financial position and current cash flows.

Based on those discussions, the company is seeking approval for the amendments that, among other things, would defer interest and amortization and add a cash flow sweep mechanism to the bond agreement.

The consent solicitation will end at 7 a.m. ET on Oct. 14.

Consents are needed from the holders of at least two-thirds of the bonds.

The holders of more than two-thirds of the outstanding bonds have said they will vote in favor of the changes, according to the notice.

Interest retention, deferral

If the amendments are made, the company will be obligated to fund the interest retention account only through and subject to the cash flow sweep both for payment of the deferred interest amount and subsequent ordinary interest payments.

On the interest payment date coming up in January, 50% of the interest due will be payable, and the remaining 50% will be payable as part of and subject to the cash flow sweep.

Amortization deferrals

The installments due in September 2016, January 2017 and July 2017, totaling $40 million, would be deferred, with the next instalment payment of $15 million falling due in January 2018.

The deferred amortization would be repaid through the cash flow sweep after the deferred interest amount has been fully repaid and the full retained amount has been paid into the minimum liquidity account. Any part of the deferred amortization that is not paid under the cash flow sweep would be paid at maturity.

The installment due in September that has been separated from the bonds would technically be added back to the principal.

Minimum liquidity account

If the amendments are made, the retained amount and the requirement to maintain liquidity will be increased to $10 million from $5 million through the cash flow sweep after the deferred interest amount is fully repaid.

The retained amount will be deposited into and be held on the minimum liquidity account.

The current retained amount will be deposited into the escrow account of Latina Offshore, to be renamed the minimum liquidity account, which will continue to be pledged and blocked in favor of the bond trustee and the bondholders.

Cash flow sweep

Under the amendments, a cash sweep mechanism would require 100% of the company’s excess cash flow to be used in the following order as soon as reasonably possible following receipt of any revenues or factoring proceeds from its charter contracts:

• Up until the interest payment date in January, fund half of the January interest payment into the interest retention account;

• Pay the deferred interest amount;

• Build up the retained amount to $10 million;

• Pay deferred amortization.

Other changes

If the amendments are made, the company will have a call option at par plus accrued interest for all, but not part, of the bonds, and the company will be restricted from making any dividends or other distributions of any kind until the bonds have been repaid in full.

New equity

Under the proposed terms, the parent company would transfer $7,450,625 (the "new equity") into an account that is pledged, but not blocked, in favor of the bond trustee.

The parent company could make withdrawals from the new equity account on a monthly basis in order to cover payment of operating expenses; selling, general and administrative expenses and capital expenses.

The issuer is the offshore division of Mexico-based Constructora y Perforadora Latina SA.

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