Paladin proposes restructuring to address 6% convertibles’ maturity

By Wendy Van Sickle

Columbus, Ohio, Jan. 9 – Paladin Energy Ltd. has resolved to enter into a proposal to restructure its balance sheet, which if implemented, will reduce its debt obligations and extend the maturity of its remaining debt, according to a press release.

Without having made progress on its potential sale of a 24% interest in Langer Heinrich Mine, the company said the restructure proposal aims to address the upcoming maturity of its outstanding $212 million of 6% convertible bonds due April 30 “with a holistic solution that provides a stable and sustainable capital structure for the benefit of all stakeholders and a platform for future growth when the uranium market improves.”

The restructure proposal contemplates exchanging $362 million of convertibles, comprising all outstanding 2017 convertibles and 2020 convertibles, into:

• $115 million of new secured bonds due 2022, with a 7% cash coupon;

• $102 million of new 2024 convertible bonds, with a zero coupon and conversion price of $0.0512 per share;

• $145 million, or about 40%, of Paladin shares to be issued at A$0.05/share; and

• Any accrued unpaid interest to be exchanged 75%:25% into the new secured bonds and the new 2024 convertible bonds respectively.

Bondholders representing 57% of the 2017 convertible bonds and 41% of the 2020 convertible bonds have already signed binding undertakings to support the restructure proposal and have agreed to a standstill until June 30 of Paladin’s obligations under the bonds, the company said.

In addition to those bondholders who have already signed binding agreements to support the restructure proposal, a number of other bondholders have been briefed on the proposal and are finalizing their internal procedures to sign agreements as well, Paladin said.

In order to implement the proposal, the company must have the support of bondholders representing 75% of each of the 2017 and the 2020 convertibles. Until that support is received and other conditions are met, the company said the proposal remains “highly conditional.”

Key conditions include that

• Electricite de France (EDF) must consent to amendments to the long term off-take agreement allowing early deliveries against the prepayment amount paid by EDF in 2012 and security sharing arrangements with the new secured bonds and the new 2024 convertibles;

• Formal approval must be granted by holders of the existing convertibles;

• Shareholders must give approval;

• Paladin must conduct an equity raising of at least $75 million;

• Paladin will continue to hold 75% of Langer Heinrich Mine;

• There must be no superior proposal;

• All necessary regulatory approvals must be granted, including from Australia's Foreign Investment Review Board; and

• Consent must be given by existing secured parties to grant subsequent ranking security in favor of EDF, the new secured bonds and the new 2024 convertible bonds.

The company said the proposal is the result of talks with a number of key stakeholders over the past few weeks.

Paladin said it plans to work towards completing the relevant conditions to closing the restructure proposal with the aim of implementing it in the second quarter of the calendar year.

"Paladin will have a manageable debt load with a longer-term repayment profile, which means the company is better positioned to ride out the current poor uranium market conditions and generate upside for shareholders when uranium prices have recovered,” Paladin chief executive officer Alex Molyneux said of the restructure proposal in the press release.

More on new secured bonds

For every $1,000 in principal of the existing convertible bonds, bondholders will receive $318 in new 7% secured bonds, about 32% of the principal of the existing convertible bonds.

The new secured bonds will have a maturity date around April 2022. The coupon will be payable in equal installments on May 31 and Nov. 30 of each year.

The new secured bonds will have second-ranking security over certain assets currently subject to security in favor of Nedbank Ltd. or other secured parties; and a first-ranking security over other assets that are not subject to the existing security or new material assets.

Paladin will have the right to redeem any of the new secured bonds at any time at a redemption price equal to the outstanding principal amount plus an additional early redemption fee calculated as a percentage of the outstanding principal amount, initially 10% and stepping down by 2% on each anniversary of issuance.

No dividends can be payable to Paladin shareholders until new secured bonds are repaid.

New 2024 convertibles

For every $1,000 in principal of the existing convertible bonds, bondholders will receive $282 in new 2024 convertibles, about 28% of the value.

The new convertibles will have a maturity date around April 2024, with zero coupon and be secured, but subordinated to existing security and the bond security.

The convertibles will initially be convertible into ordinary shares at $0.0512 per share at the option of bondholders.

The conversion price will be adjusted downwards if the price of the new equity issue is less than certain thresholds. Further, if the volume weighted average price of Paladin shares for the three months prior to Jan. 1, 2020 is less than $0.0366 a share, the conversion price will be adjusted to $0.0366 per share.

Paladin will have the right to redeem the new convertibles at any time post the first anniversary of issuance if the 30-day VWAP is at least 130% of the early redemption amount at the time divided by the exchange ratio, where early redemption amount is calculated based on a 6% compound capitalization rate from the date of issuance and the exchange ratio is calculated by dividing $1,000 by the prevailing conversion price.

Bondholder share issue

For every $1,000 in principal of existing convertibles, bondholders will receive 10,929 ordinary shares an issue price of A$0.05/share. Bondholders will receive additional ordinary shares in the event the new equity issue is below certain thresholds.

Paladin is a Perth, Australia-based uranium mining company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.