TMM completes note exchange

New York, Aug. 6 - Grupo TMM SA said its exchange offer and consent solicitation for its 9½% notes due 2003 and 10¼% senior notes due 2006 expired at midnight ET on Aug. 5 after achieving a sufficient response.

As required under the amended terms of the exchange, holders tendered 95.3% of the 9½% notes and 97.3% of the 10¼% notes.

TMM said it expects to issue the new notes on Aug. 10.

TMM also said it had sufficient consents to amend the indenture for the 10¼% notes to remove all of the restrictive covenants.

Any 9½% notes not tendered will be repaid in cash with accrued interest.

"Today's economic climate has made the restructuring of TMM challenging, but the successful completion of the bond exchange at the levels we were able to achieve allowed us to avoid bankruptcy proceedings and will give TMM the financial flexibility needed to move forward with a new strategy for increasing value and providing healthy returns to our investors," said Javier Segovia, president of TMM, in a news release.

At its last announcement on July 30, TMM reduced the minimum participation required for the 9½% notes to 95.3% from 95.7%.

TMM said in a 424B3 filing with the Securities and Exchange Commission that as a result of a broker miscommunication $600,000 principal amount of the 9½% notes was tendered by two different nominees for the same beneficial holder, resulting in a double counting of the amount of notes submitted.

As of 5 p.m. ET on July 29, $168.705 million principal amount of the 9½% notes and $194.771 million principal amount of the 10¼% senior notes due 2006 had been tendered and not withdrawn.

TMM also said in the SEC filing it will sell $25 million proceeds of new notes to some of the noteholders who agreed to support the exchange.

The new notes will be sold at a discount. The price will depend on the closing date, but assuming closing on Aug. 10 the level will be 80.1% of principal for a total of $31.2 million principal amount. TMM paid a commitment fee of $250,000 and will pay a draw-down fee of 2% at closing.

TMM will use proceeds to repay any 9½% notes that remain outstanding after the exchange, to possibly retire 10¼% notes or cure payment defaults on the 10¼% notes and to pay fees and expenses. TMM will also use proceeds to fund a make-whole payment to the purchasers to make up any decline up to 10% in the value of the new notes after they are registered.

TMM said on July 23 that it had amended its exchange offer and consent solicitation for its 9½% notes due 2003 and 10¼% senior notes due 2006.

The Mexico City-based railroad operator said the exchange will now expire at midnight ET on Aug. 5, pushed back from 5 p.m. ET on July 22.

TMM added the right to withdraw notes tendered, including those already tendered. Notes can be withdrawn at any time up to the expiration.

TMM also adjusted the minimum tender condition, reducing the required participation for the 2003 notes to 95.7% from 98% and increasing the level for the 2006 notes to 97.3% from 95%.

On July 2, Grupo TMM extended the consent deadline on its exchange offer to 5 p.m. ET on July 16 from July 8 in light of the Independence Day holiday weekend in the United States.

TMM said on June 23 that it had begun an exchange offer for its 2003 notes and 2006 notes in order to implement the previously announced restructuring of its debt. TMM said it was also soliciting consents to amend the indenture for the 2006 notes as well as acceptances of a pre-packaged plan of reorganization.

The company initially set July 8 as its consent deadline and said the exchange offer was scheduled to expire at 5 p.m. ET July 22, subject to possible extension.

Grupo TMM said it is offering holders of its existing notes new senior secured notes due Aug. 1, 2007 (although the maturity is subject to extension to Aug. 1, 2008 at the company's option) for the existing notes. The new notes will initially carry a 10½% coupon, with the interest payable in cash or in additional new notes, provided that Grupo TMM must pay at least 2% annually in cash interest. If the company elects to pay a portion of the interest in additional new notes, the interest rate will increase. The new notes are redeemable at any time at the option of the company, and it is required to redeem or repurchase notes with the proceeds of certain assets sales or other payments.

The new notes would be exchanged for the existing notes at a ratio of $1,000 principal amount of new notes for each $1,000 principal amount of existing notes.

Holders who tender their existing notes and who deliver their consents by the consent deadline will be entitled to receive a pro rata portion of $21.1 million of the new notes as a consent payment.

Grupo TMM said that the primary purpose of the consent solicitation is to eliminate substantially all of the restrictive covenants of the indenture governing the 2006 notes. Holders who tender their 2006 notes will be deemed to have given their consent to the proposed amendments.

The company said that it will also pay accrued unpaid interest on the existing notes through the settlement date of the exchange offer in additional new notes. The company calculated that as of July 22, the scheduled expiration date of the exchange offer, the amount of accrued interest on the 2003 notes and the 2006 notes will be about $186 and $190, respectively, per $1,000 principal amount of the existing notes.

Grupo TMM said that it has entered into voting agreements with the holders of about 72% of the outstanding principal amount of the existing notes (71% of the 2003 notes and 72% of the 2006 notes), under which they have agreed to exchange their existing notes for the new notes and support the proposed restructuring.

Concurrently with the exchange offer, Grupo TMM is also soliciting votes to accept a prepackaged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code or, at the company's option, Mexican bankruptcy law. If confirmed, the prepackaged plan would accomplish the restructuring on substantially the same terms as the out-of-court restructuring through the exchange offer.

Grupo TMM said it only expects to seek confirmation of the prepackaged plan if the minimum tender condition to its exchange offer is not satisfied or waived.

The company said the exchange offer would be conditioned upon, among other things, its receipt of valid tenders (including exchanges under the terms of the voting agreements) representing at least 98% of the 2003 notes and at least 95% of the 2006 notes.

Innisfree M&A Inc. is the solicitation agent, information agent and voting agent for the exchange offer and solicitation (call 877-750-2689).

Questions regarding the proposed restructuring should be directed to Martin F. Lewis and Ronen Bojmel at Miller Buckfire Lewis Ying & Co. LLC, the company's financial adviser (call 212 895-1805 or 212 895-1807) or to Alan D. Fragen (call 310 788-5338) or Oscar A. Mockridge (call 212 497-4175), both of Houlihan Lokey Howard & Zukin Capital, the ad hoc bondholders' committee's financial adviser.

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