Indonesia's Gajah Tunggal completes exchange offer for 10¼% bonds; holders pass second resolution

By Jennifer Chiou

New York, July 22 - PT Gajah Tunggal Tbk. announced the wrap of the exchange offer for its $420 million of 10¼% guaranteed bonds due 2010.

Bondholders approved the first extraordinary resolution at the first bondholders meeting on July 6 in Singapore. The second bondholder meeting was also a success, with more than 85% of holders voting in the second extraordinary resolution. It had, however, previously failed to reach the required quorum and the meeting had been adjourned to July 21.

The deadline for giving voting instructions was 11 a.m. ET on July 16, previously extended from July 1, and the offer expiration was also at 11 a.m. ET on July 16, prolonged from July 3. The early exchange deadline of 11 a.m. ET on June 26 had not been extended.

The offer to issue new dollar-denominated callable step-up guaranteed secured bonds due July 2014 in exchange for the existing notes began on June 12.

Both the existing and new bonds are issued by subsidiary GT 2005 Bonds BV and guaranteed by Gajah Tunggal, according to a company news release. The new bonds will be secured by assets of Gajah Tunggal valued at $140 million.

The company was also soliciting consents to amend the terms of the note trust deed, and it received the requisite consents. Among other things, the amendments allow GT 2005 Bonds to call any existing notes that remain outstanding after the settlement of the exchange offer.

Because tenders and voting instructions in favor of the proposed amendments had been received from more than 75% of bondholders, the company previously noted that it expected to reach the required quorum and approval for the second extraordinary resolution at the adjourned meeting.

As already reported, the offer is part of Gajah Tunggal's debt restructuring plan, which the company said is being undertaken in order to meet its obligations to its creditors while preserving enough liquidity to sustain its business operations.

The ultimate objective of the offer is to avoid a default under the existing bonds. The more immediate objectives are to capitalize the coupon payable on the bonds July 21, reduce the cash drain from interest expense in the short to medium term and address the refinancing needs of the company by extending its debt maturity profile.

The coupon for the new bonds is initially 5%. It steps up to 6% in 2012, 8% in 2013 and 10¼% in 2014.

Gajah Tunggal will be restricted in its ability to pay dividends, make other restricted payments or incur new debt until the coupon on the new bonds reaches 10¼%. The company can increase the coupon to 10¼% before 2014 if it chooses.

Holders who tendered their notes for exchange were deemed to have given consent to the paying agent, as proxy, to cast votes in favor of the amendment at the meeting.

The company was offering $1,051.125 principal amount of new notes for every $1,000 principal amount of notes exchanged by the early exchange deadline and $1,001.25 for every $1,000 principal amount of notes tendered after that time but before the offer expiration.

It amended the offer so that all holders who tendered will receive the early tender payment.

Holders will also receive a capitalized interest payment of $51.25 per note. The settlement date was expected to be July 24.

The company said that it will redeem and cancel a portion of the bonds following this schedule: 2.5% of the new bonds on or prior to July 21, 2011; 5% of the new bonds on or prior to July 21, 2012; and 10% of the new bonds on or prior to July 21, 2013.

The conditions to the offer - the required quorum being met at the first meeting and the majority of bondholders voting in favor of the proposed amendments - had been met.

The dealer manager was Credit Suisse (call debt syndicate group in Hong Kong at +852 2101 7233 or liability management group in London at +44 20 7883 6748). The information and exchange agent was Lucid Issuer Services Ltd. (+44 20 7704 0880).

Gajah Tunggal is a tire manufacturer based in Jakarta, Indonesia.

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