Mexico's Axtel amends exchange offers for 7 5/8% notes, 9% notes

By Angela McDaniels

Tacoma, Wash., Jan. 14 - Axtel, SAB de CV amended its exchange offers and extended the early tender date to 5 p.m. ET on Jan. 18 from 5 p.m. ET on Jan. 11, according to a company news release.

The changes are based on discussions with bondholders, and the company said parties who manage the two largest bond holdings are now supporting and participating in the exchange offer.

The exchange offers are being held through wholly owned subsidiary Axtel Capital, SA de CV Sofom ENR for any and all of Axtel's outstanding $275 million 7 5/8% senior notes due 2017 and $490 million 9% senior notes due 2019.

Holders are being offered a combination of senior secured notes due 2020, peso-denominated senior secured convertible dollar-indexed notes due 2020 and cash.

The company is also soliciting consents to amend the notes to eliminate substantially all of the covenants other than the covenant to pay principal and interest when due and to eliminate most events of default.

Holders who tender their notes will be deemed to have consented to the proposed amendments.

For each $1,000 principal amount of old notes tendered by the early tender date, holders will receive $500 principal amount of senior secured notes, Ps. 570 principal amount of convertible notes, $50 cash and a $116 consent payment. Converted using an exchange rate of 12.7777 pesos per dollar, the consideration is $710.61.

Holders who tender after the early tender date will not receive the consent payment. In this case, the consideration is $594.61 per $1,000 principal amount of notes.

Prior to the changes, the payment for each $1,000 principal amount of old notes tendered by the early tender date was going to be $650 including $466 principal amount of senior secured notes, Ps. 439 principal amount of convertible notes, $50 cash and a $100 consent payment.

Note terms changed

The company also made some changes to the terms of the new notes:

• The initial interest rate is 7%. It will increase to 8% on the first anniversary of the issue date and to 9% on the second anniversary. Before, the interest rate was going to remain 7% with no step-up;

• Beginning Jan. 31, 2016, the company will be entitled to redeem all or a portion of the senior secured notes at 106.75. The redemption price will decline to 104.5 on Jan. 31, 2017, to 102.25 on Jan. 31, 2018 and to par on Jan. 31, 2018;

• Prior to Jan. 31, 2016, the company may use the proceeds from one or more equity offerings to redeem up to 35% of the senior secured notes. The redemption price is 107 in year one, 108 in year two and 109 in year three;

• The convertibles will be non-callable for three years. Beginning Jan. 31, 2016, they will be callable at a redemption price equal to 200% of the principal amount plus accrued interest and including additional amounts payable in respect of such payment. In addition, on and after Jan. 31, 2016, in the event that the market price of Axtel's ordinary participation certificates exceeds 200% of the Dec. 21 conversion price of Ps. 2.41 in at least 20 of the past 30 trading days, Axtel will be entitled to redeem the convertibles at a redemption price equal to 100% of their principal amount plus accrued interest and including additional amounts payable in respect of such payment;

• So long as the senior secured notes are outstanding, the indenture governing the convertibles will not include restrictive covenants. If the convertibles remain outstanding at any time that the senior secured notes are not outstanding and the senior secured notes indenture is not in effect, the company will enter into a supplemental indenture to include in the convertibles such restrictive covenants as are in the senior secured notes indenture.

Background

The exchange offers began Dec. 26 and will end at 11:59 p.m. ET on Jan. 28.

The convertible notes are indexed to dollars and, unless a holder requests otherwise, payable in dollars.

The new notes will mature on Jan. 31, 2020 unless more than $125 million 9% notes are outstanding on June 22, 2019, in which case the new notes will mature on June 22, 2019.

According to a prior news release, the maximum amount of cash, senior secured notes and convertible notes that will be issued in the exchange offers and consent solicitations is $114.8 million, $356.5 million and Ps. 335.5 million, respectively.

The exchange offers and consent solicitations are conditioned on the receipt of consents representing a majority of each series of notes and the concurrent completion of a sale-and-leaseback transaction with MATC Digital, S de RL de CV, a subsidiary of American Tower Corp.

In the transaction, the company is proposing to sell 890 telecommunications sites to MATC Digital for $250 million. MATC would then lease space on these telecommunications sites back to Axtel.

The exchange offers are being made only to qualified institutional buyers under Rule 144A or accredited investors under Rule 501(a) or to those who are not U.S. persons under Rule 902.

D.F. King & Co., Inc. (800 967-4612, 212 269-5550 or axtel@dfking.com) is the information agent.

Axtel is a fixed-line integrated telecommunications company based in San Pedro Garza Garcia, Mexico.

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