Teksid Aluminum receives consents for Nemak sale from 11 3/8% noteholders

By Angela McDaniels

Seattle, March 8 - Teksid Aluminum Luxembourg Sarl, SCA had received consents from holders of 62% of its €240 million of 11 3/8% senior notes due 2011 as of noon ET on March 7, according to a company news release.

The company needed consents from holders of at least a majority of the notes and has, therefore, received enough consents to execute a supplemental indenture giving effect to the proposed amendments to the indenture.

The proposed amendments allow Teksid's indirect parent, TK Aluminum Ltd., to sell its operations in North America - except for its lost-foam operations in Alabama, which will be retained by the company - and its operations and interests in South America, China and Poland to Tenedora Nemak, SA de CV, a subsidiary of Alfa, SAB de CV.

The proposed amendments also provide for the release of note guarantees of the relevant Nemak-purchased subsidiaries involved in the transaction and implement the terms that were agreed to with the ad hoc committee of noteholders and announced on Feb. 27, including:

• Teksid Aluminum must pay the interest due on the notes as of Jan. 15, plus interest, out of the proceeds from the first closing of the Nemak sale;

• Teksid Aluminum must make a tender offer for a limited portion of the notes at 100% of par.

The tender offer would involve that amount of notes that can be purchased for the euro equivalent of $71.89 million, less the sum of the Jan. 15 interest payment and, if the first closing takes place before March 15, the incremental amount as a result of any delay in the closing of additional interest payable on debt being paid or purchased in connection with the first closing and additional overdue interest on the Jan. 15 payment;

• The permitted uses of proceeds from the sale will include repayment of senior secured debt, cash collateralization of outstanding letters of credit, payment of the Jan. 15 interest payment, the purchase of intercompany obligations by Nemak, repayment of capitalized leases, repayment of non-recourse factoring relating to the entities sold in the first closing of the Nemak sale, settlement of intercompany transactions necessary for the consummation of the Nemak sale, payment of employee-related expenses and professional fees and expenses related to the transaction and a reserve of additional funds to provide for contingencies;

• The proceeds to be received under TK Aluminum's settlement agreement with Fiat, proceeds received from subsequent anticipated sales of its Polish and Chinese operations under the Nemak sale and any remainder of a purchase price adjustment escrow that is returned by Nemak to Teksid Aluminum will be used to repurchase additional notes through tender offers at 100% of par plus interest.

Remaining notes will be left outstanding, but will no longer be guaranteed by those subsidiaries purchased by Nemak;

• A standstill will be implemented that prevents acceleration of the notes through March 15, provided the lenders under Teksid Aluminum's credit facilities do not accelerate the amounts due under TK's senior credit facilities; and

• Teksid Aluminum's financial statement reporting requirements to noteholders will be deferred.

Most of the amendments to the indenture will not become effective if the first closing of the Nemak sale does not occur by March 15.

The consent solicitation began on March 2 and expires at 10 a.m. ET on Wednesday. The company did not offer a consent fee.

TK Aluminum said it continues to work with Nemak to finalize definitive documentation consistent with these terms and to consummate the Nemak sale. Closing of the sale remains subject to execution of the supplemental indenture and other customary conditions, including regulatory approvals.

Failure to close the Nemak sale could materially and adversely affect the company's ability to continue trading, according to the release.

Teksid Aluminum Luxembourg is a maker of aluminum engine castings for the automotive industry and a subsidiary of Carmagnola, Italy-based TK Aluminum.

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