Metaldyne considers dropping tender offer for 11% notes

By Angela McDaniels

Seattle, Oct. 17 - Metaldyne Corp. is considering holding a consent solicitation without a tender offer for its $250 million outstanding 11% senior subordinated notes due 2012, according to an 8-K report filed with the Securities and Exchange Commission on Tuesday.

The cash that would have funded the tender offer would instead be used to reduce the senior secured bank commitments for the upcoming acquisition of Metaldyne by Asahi Tec Corp.

Metaldyne planned to hold a tender offer for a minimum of $225 million of the 11% notes and its 10% subordinated notes due 2014 in connection with its Sept. 1 agreement to be acquired by Asahi Tec.

Subsequently, Metaldyne and Asahi Tec began discussions as to whether the tender offer "should be pursued on the previously contemplated basis or at all" in light of production cutbacks and inventory reductions at Ford Motor Co., DaimlerChrysler Corp. and General Motors Corp. and Metaldyne's expectation that financial results for the third quarter will be lower than expected.

Holders of $141.425 million of the 11% notes entered into a lockup agreement on Oct. 13 under which they agreed to tender their notes or provide any requested consent only if such tenders or consents are agreed to by a supermajority - 90% in principal amount of the notes and two-thirds of the noteholders who signed the agreement.

The companies then received notice that some of Metaldyne's senior noteholders and senior subordinated noteholders were unwilling to participate in the contemplated tender offer and consent solicitation, according to the Tuesday filing.

The Plymouth, Mich., supplier of powertrain and chassis systems and components said it cannot alter the original plan to tender for the 11% notes and 10% notes without also modifying the provisions of the merger agreement and other related transaction agreements. No assurance was given that Metaldyne and Asahi Tec would be able to obtain the agreements needed to effect any such modifications, which could include additional sources of financing.

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