China's Asia Aluminum tenders for 8% notes, AA Investments for PIK notes

By Susanna Moon

Chicago, Feb. 17 - Asia Aluminum Holdings Ltd. said it began a tender offer and consent solicitation for its $450 million 8% senior notes due 2011.

AA Investments Co. Ltd. plans to purchase for cash its $355 million 12% senior pay-in-kind notes due 2012 and $180 million 14% senior pay-in-kind notes due 2012, along with warrants to purchase 1,706,987 ordinary shares.

The tender offers will expire at 5 p.m. ET on May 18.

Holders tendering PIK notes must simultaneously tender all related warrants, with the number of warrants representing at least the required pro rata number of warrants based on the original ratio of PIK notes and warrants issued, which is 2.86643 warrants per $1,000 principal amount for the 12% notes and 1.36748 warrants for the 14% notes.

The companies are soliciting consents to a one-time waiver and amendments to some provisions of the indentures. The one-time waiver would allow them and their subsidiaries to incur debt in China and to grant liens over certain assets, to fund a substantial portion of the total payment and to provide working capital as well as release and waive any and all claims each holder may have arising from or in connection with certain defaults under the indentures. The amendments would eliminate substantially all of the restrictive covenants and many of the events of default.

Holders who tender their notes must also deliver their consents.

For each $1,000 principal amount of the notes, investors will receive $275 for the 8% notes, $135 for the 12% notes and $135 for the 14% notes.

The total payment includes an early participation fee of $50 for notes tendered by 5 p.m. ET on March 10, the early consent date.

The companies said they intend to use financing from China's municipal government to help fund the offer and that the availability of the financing depends on the valid tender by holders of at least 90% of the principal amount of the 8% notes and all of the PIK notes by the early consent date.

The companies will not pay accrued interest.

Asia Aluminum is a Hong Kong-based company that makes aluminum extrusion and stainless steel products serving the construction, transportation, industrial and home improvement sectors.

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