Aquarius gets tenders for $172.6 million 4% convertibles due 2015

By Toni Weeks

San Luis Obispo, April 14 - Aquarius Platinum Ltd. said it took in tenders for $172.6 million of its $298 million outstanding 4% convertible bonds due Dec. 18, 2015 by 11 a.m. ET on April 11, the expiration date for the company's tender offer.

The offer is conditioned on the receipt of tenders for at least $150 million of bonds, which has been satisfied, and the successful completion of a rights offering for up to $225 million, the proceeds of which will be used, in part or in whole, to finance the tender offer. The maximum principal amount of bonds to be accepted will be the lesser of $225 million and the maximum amount that can be purchased at the repurchase price using the net proceeds of the rights offering.

According to a press release, the rights offering will be launched on April 15, and Aquarius said it will announce on May 15 its decision of whether (i) the funding condition has been satisfied and (ii) the company will accept valid tenders of securities. If so, the acceptance amount will be announced at that time.

If the principal amount of bonds tendered exceeds the cap, the bonds will be accepted for purchase on a pro rata basis, with the pro ration factor, if applicable, to be announced with the acceptance amount on May 15.

The repurchase price is $92,000 per $100,000 principal amount of bonds plus accrued interest up to but excluding the settlement date, which is expected to be May 21.

The amount tendered reflects $70 million of securities tendered under lock-up agreements with Investec Asset Management proprietary Ltd. Aquarius had previously said that some bondholders - including funds and accounts under management by 36ONE Asset Management (Pty.) Ltd., Bluebay Asset Management, Investec Asset Management and direct and indirect investment management and investment adviser subsidiaries of BlackRock, Inc. - had agreed to tender $137.8 million principal amount of bonds under lock-up agreements.

The $137.8 million principal amount of locked-up bonds included $93.3 million held in funds and accounts under management by Investec. In order to facilitate the transaction, Investec has agreed to tender a "significant" portion of its bonds, the company said, and if more than $150 million principal amount of bonds is tendered, the amount of Investec's locked-up bonds treated as being validly tendered for repurchase, including for the purposes of any pro ration, will be reduced to such lower amount as results in a total acceptance amount of $150 million, subject to Investec being treated as validly tendering no less than $63.6 million principal amount of bonds.

If the tender offer is successful, the bondholders party to the lock-up agreements will be entitled to a fee equal to 1% of principal amount of bonds that they committed to tender.

Reason for offer

The conversion price is $6.578 per common share, and the company's shares closed at $0.59 on April 4. Given the conversion price, the company believes it is highly unlikely that bondholders will choose to exercise their conversion rights and it will therefore be required to redeem all of the bonds at maturity.

According to the new release, the company's board had been considering alternative arrangements for the potential restructuring or refinancing of the bonds for some time and believes that uncertainty among investors about the company's ability to refinance the bonds has negatively impacted the attractiveness of investing in Aquarius Platinum shares.

The dealer managers are Morgan Stanley & Co. International plc (44 (0) 207 677 5040 or liabilitymanagementeurope@morganstanley.com) and Rand Merchant Bank (44 (0) 207 939 1777 or martin.richardson@rmb.co.uk). The tender agent is Lucid Issuer Services Ltd. (44 (0)20 7704 0880 or aqp@lucid-is.com).

Aquarius is a platinum producer based in Hamilton, Bermuda.

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