Avenue Capital to purchase all Tekni-Plex's tendered 10 7/8% notes

By Jennifer Chiou

New York, Aug. 15 - Tekni-Plex, Inc. entered into a note purchase agreement with Avenue Capital and affiliates under which Avenue Capital will purchase all of Tekni-Plex's 10 7/8% senior secured notes due 2012 that are tendered in the company's offer to buy the securities, according to an 8-K filing with the Securities and Exchange Commission.

On June 27, the company began a change-of-control offer to buy its $150 million of 10 7/8% notes.

Under the agreement, Avenue Capital will purchase the notes at 101% plus accrued interest.

As consideration, Tekni-Plex will pay Avenue a fee equal to the sum of $2.25 million and 6% of the purchase price actually paid by Avenue.

The closing of the note purchase agreement, which is expected to occur simultaneously with the settlement of the offer on Aug. 22, will allow the company to fulfill its obligation to purchase notes as required by the indenture.

The Somerville, N.J., company said that the expiration for the offer is 5 p.m. ET on Aug. 19.

As already reported, the offer is required following the recapitalization that closed on May 30 giving funds managed by Oaktree Capital Management LP and Avenue Capital Group control of more than 80% of the stock. Oaktree and Avenue received the equity in exchange for $246.081 million of Tekni-Plex's 12¾% senior subordinated notes due 2010.

The company previously said that discussions are under way with some stockholders over financing for the change-of-control offer.

Tekni-Plex also noted that on June 26 it put its chief financial officer and corporate controller on paid leave pending the outcome of an internal investigation into allegations that during fiscal years ending 2000 to 2006 the company may have incorrectly recorded inventory and accounts receivables in its Colorite Plastics Co. division.

Law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP will lead the investigation and direct forensic accounting consultants.

Tekni-Plex added that it has reported the developments to the U.S. Attorney's Office for the Southern District of New York and to the staff of the Northeast Regional Office of the Securities and Exchange Commission.

The board also previously expanded the scope of the investigation beyond Colorite to determine whether any improper accounting practices occurred in other divisions.

HSBC Bank USA, NA is the trustee.

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