KOKS solicits consents to amend $350 million of 7¾% notes due 2016

By Toni Weeks

San Luis Obispo, Calif., Feb. 19 - KOKS Finance Ltd. announced it has commenced a consent solicitation for its $350 million of 7¾% loan participation notes due 2016.

The company is seeking consents to amend the indentures governing the notes to allow OAO KOKS, its guarantors and subsidiaries to incur debt and to create or permit security interests against certain assets in order to increase its financing options and improve its ability to implement high-priority investment projects.

According to a company announcement with the London Stock Exchange, such projects are intended to increase revenues, reduce costs as a result of synergies with existing assets, reduce costs associated with maintaining unused production capacity and undrawn committed financing in relation to unfinished mines, enhance the company's asset base and enable KOKS to reduce its indebtedness and leverage.

The early instruction deadline is 10 a.m. ET on March 4. The consent solicitation expires at 10 a.m. ET on March 13.

The company needs the consent of 75% of noteholders to pass the amendments.

If the amendments are passed, KOKS Finance will pay an early consent amount of $15 per $1,000 principal amount of notes for consents received by the early instruction deadline and $7.50 per $1,000 principal amount of notes for consents received after the early instruction deadline but before the offer expiration date. Voting may take place by voting instruction or consent letter instruction via the Clearing Systems or by attending a meeting to be held in London at 10 a.m. on March 15.

The company's current high-priority projects include the development of the Butovskaya and Tikhova mines and the expansion of the Vladimirskaya mine, the announcement said. KOKS expects that the $1.7 billion availability under its committed credit facilities is sufficient to fund the projects, but because of recent volatility in economic factors affecting the mining industry, drawing on such credit facilities as planned may cause KOK's consolidated leverage ratio to exceed the amount specified in the loan agreement, which would restrict KOK's ability to draw funds for its projects.

KOKs said it has reduced its budgeted costs for 2013 by focusing on its high-priority projects and managing its costs. These measures helped to reduce the group's capital expenditures by 20% in 2012.

D.F. King Worldwide (44 20 7920 9700 attention Damian Watkin or Katerina Papamichael in London or 212 269-5550 attention Elton Bagley in New York) is the tabulation agent. Bank of New York Mellon, London Branch is the principal paying agent.

KOKS Group also announced on Feb. 15 that it had obtained covenant amendments to its credit lines with Sberbank, which gave the company additional flexibility in its financing of important, strategic investment projects, including the construction of the Butovskaya and Tikhova mines. The mines are expected to begin production in the first half of 2013 and second half of 2014, respectively, according to a previous company press release.

The company is a coke and pig iron producer and miner based in Moscow.

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