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Norske Skog secures needed consents to amend 11Ύ% notes due 2016
By Susanna Moon
Chicago, Feb. 18 Norske Skog Holding AS said it obtained the needed consents for its 129.6 million of outstanding 150 million 11Ύ% senior notes due 2016 and executed a supplemental indenture.
The company sought consents to amend the notes indenture to delete some covenants, and the supplemental indenture will become operative when all of the tendered 2016 notes are settled Feb. 24.
As previously announced, the cash consent fee is 40.00 per 1,000 principal amount.
As a result of receiving the needed consents, the company said it may issue notes due 2023 in exchange for all 2033 notes tendered in the companys exchange offers.
The consent solicitations for the other three series of notes remain subject to obtaining the needed votes at the noteholder meetings Feb. 23, the company said.
The notes covered by the exchange offers and consent solicitations for the four issues of notes issued by Norske Skogindustrier ASA are as follows:
$158.2 million of outstanding $200 million 6 1/8% senior notes due 2015;
The 11Ύ% notes;
388.5 million of outstanding 500 million 7% senior notes due 2017; and
$200 million 7 1/8% senior notes due 2033.
The exchange offers will end at 11:59 p.m. ET on Feb. 20, extended from 11:59 p.m. ET on Feb. 19, with settlement on Feb. 24. The early exchange and consent deadline was 5 p.m. ET on Feb. 4.
Participation update
The company said that instructions received to date indicate about 33% participation in the exchange offers across all series of the notes, which fails to meet the exchange condition in order to issue 290 million principal amount of Norske Skog AS's 11Ύ% senior secured notes due 2019. If the condition is unmet or waived, Norske Skog will issue 179 million principal amount of the notes, according to a company press release.
As a result, assuming an issuance of 179 million principal amount of the notes and the current exchange and consent participation levels, about 101 million of cash would be used in the exchange offers and consent solicitations including fees and expenses, the company noted.
The current exchange participation levels would result in the issue of about 176 million of exchange notes due 2021 and exchange notes due 2023, which will be structurally senior to the existing notes, the release noted.
If Norske Skog were to issue 290 million principal amount of the notes, then at the current exchange participation levels about 133 million of cash would be used in the exchange offers and consent solicitations.
The current level of participation in the exchange, while meaningful, is still insufficient from the companys perspective to complete the refinancing of the group and shift focus to operations and value creation, Norske Skog chief executive officer Sven Ombudstvedt said in the press release.
Recent changes
The company made the following amendments to the offers after issuing a warning Feb. 5 about inadequate participation in the offers:
Increased the exchange offer payment for the 7% notes to 643.75 of new notes plus 125.00 in cash per 1,000 principal amount. Previously the company was offering 618.75 of new exchange notes due 2021 plus 105.00 in cash;
Doubled the early instruction fee to 40.00 per 1,000 of 11Ύ% notes and extended it until the offer expiration; and
Made the early instruction fee available to holders who revoke their consents in order to tender their existing notes for exchange in the exchange offers and to holders who have not previously taken any action and tender their existing notes for exchange in the offers.
Payment terms
As previously announced, if the needed consents are received, the exchange condition is satisfied and 290 million of new notes issued, then the early instruction fee for the 7 1/8% notes will be increased by $50 to $70.00 per $1,000 principal amount from $20.00. The payments will be as follows:
For each $1,000 principal amount of the 6 1/8% notes, the company is offering $487.50 of new exchange notes due 2021 plus $580.00 in cash plus a possible $20.00 per $1,000 early instruction fee;
For each 1,000 principal amount of 11Ύ% notes, the company is offering 537.50 of new exchange notes due 2021 plus 380.00 in cash plus a possible 40.00 per 1,000 early instruction fee, increased from 20.00 per 1,000 previously;
For each 1,000 principal amount of 7% notes, the company is offering 643.75 of new notes plus 125.00 in cash per 1,000 principal amount, up from the previous 618.75 of new exchange notes due 2021 plus 105.00 in cash. There is also a possible 20.00 per 1,000 early instruction fee, unchanged from previously; and
For each $1,000 principal amount of the 7 1/8% notes, the company is offering $687.50 of new exchange notes due 2023 if consents are received for the 11Ύ% notes or $712.50 of new exchange notes due 2033 if consents are not received for the 11Ύ% notes. There will be no cash component apart from a possible $70 per $1,000 early instruction fee.
If the exchange condition is not satisfied, the consents are not obtained and 179 million of new notes are issued, the payments will be:
For each $1,000 principal amount of the $158.2 million outstanding 6 1/8% senior notes due 2015, the company is offering $550.00 of new exchange notes due 2021 plus $530.00 in cash plus a possible $20.00 per $1,000 early instruction fee;
For each 1,000 principal amount of the 129.6 million outstanding 11Ύ% senior notes due 2016, the company is offering 600.00 of new exchange notes due 2021 plus 330.00 in cash plus a possible 40.00 per 1,000 early instruction fee, increased from 20.00 per 1,000 previously;
For each 1,000 principal amount of the 388.5 million outstanding 7% senior notes due 2017, the company is offering 706.25 of new exchange notes and 75 in cash, increased from 681.25 of new exchange notes due 2021 plus 55.00 in cash. There is also a possible 20.00 per 1,000 early instruction fee, unchanged from previously; and
For each $1,000 principal amount of the $200 million 7 1/8% senior notes due 2033, the company is offering $687.50 of new exchange notes due 2023 if consents are received for the 11Ύ% notes or $712.50 of new exchange notes due 2033 if consents are not received for the 11Ύ% notes. There will be no cash component apart from a possible $20.00 per $1,000 early instruction fee.
Minimum threshold warning
The company said on Feb. 5 that it had not yet met the minimum response threshold in the offers and warned that it would have to consider a comprehensive review of our options.
These preliminary results indicated insufficient level of participation in the exchange offers across certain series of notes, though the level of consents received was higher than the overall level of participation in the exchange offers, the company previously said.
As previously reported, the company priced 290 million of 11Ύ% senior secured notes due 2019 at 97.5 on Feb. 2. The issue was upsized from 250 million.
Norske Skog said it will be unable to retain proceeds of more than 179 million from the total issue amount, however, without obtaining the needed consents in order to satisfy the exchange condition.
Also, the lack of exchange participation would keep the company from achieving a comprehensive capital structure solution by deferring debt maturities and attaining immediate deleveraging, the company said.
Offer terms, details
The company said on Feb. 2 that it set a minimum response threshold and increased some of the cash payments in the exchange offers and consent solicitations.
The changes followed a decision to increase to 290 million from 250 million the amount of new senior secured notes due 2019 that Norske Skog plans to issue.
In order to issue the extra notes and make the extra payments, Norske Skog said that it would need to receive tenders of at least 50% of each of the four series of notes covered by the exchange.
Assuming the needed consents are received from noteholders, Norske Skog will use the additional proceeds from the upsizing of the new notes to offer a larger cash component in the exchange, adding $50.00 or 50.00 per $1,000 or 1,000 principal amount to the amount on offer for its 6 1/8%, 11Ύ% and 7% notes.
The exchange ratio for these three series of notes will be correspondingly reduced by 6.25%.
Norske Skog also added a waterfall provision so that any additional cash proceeds not used for the 6 1/8% notes, 11Ύ% and 7% notes will be used to increase the payment for the 11Ύ%, 7% and 7 1/8% notes.
If at least 290 million of new notes are issued and at least 75% of any series of the 6 1/8% notes, 11Ύ% and 7% notes participate in the offer then the payment will be increased by $50.00 or 50.00 per $1,000 or 1,000 principal amount and the exchange ratio will decrease by 6.25%.
Previously the threshold was 80%, with additional payments made until all of the relevant series is tendered.
More offer details
Norske Skogindustrier holds $41.8 million principal amount of the 2015 notes, 20.4 million principal amount of the 2016 notes and 111,534,000 principal amount of the 2017 notes. Norske Skogindustrier intends to vote in favor of the 2015 notes proposal but is not entitled to vote its 2016 notes nor its 2017 notes, the release noted.
The exchange notes will be issued in denominations of 100,000 and integral multiples of 1,000 after that for the notes due 2021 or $150,000 and integral multiples of $1,000 for the notes due 2023 and 2033.
The new notes offering is not contingent upon the completion of the exchange offers or the consent solicitations; however, Norske Skogindustriers ability to issue all of the 250 million of new senior secured notes will require receipt of required consents under the solicitations.
To date, the proposed issue would exceed the amount of secured debt permitted to be incurred under the notes indenture and agency agreements, which would have permitted a maximum of 179 million principal amount of additional secured debt as of Dec. 31, the company said.
The exchange was announced on Jan. 23.
The dealer managers are Goldman Sachs International (+44 0 207 774 9862, 800 828-3182 or 212 902-6941 or e-mail: liabilitymanagement.eu@gs.com) and Citigroup Global Markets Ltd. (+44 20 7986 8969, 800 558-3745, 212 723-6106 or e-mail: liabilitymanagement.europe@citi.com).
The exchange and tabulation agent is Lucid Issuer Services Ltd. (+44 20 7704 0880, attn: Thomas Choquet/Yves Theis or e-mail: norskeskog@lucid-is.com).
Norske Skog is an Oslo-based paper and pulp company.
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