Russia's TMK begins consent solicitation for TMK Capital's 10% notes

By Angela McDaniels

Tacoma, Wash., Jan. 6 - OAO TMK has begun a consent solicitation for the 10% loan participation notes due 2011 issued by TMK Capital SA, according to a company news release.

Of the $600 million principal amount of notes issued, $186.7 million remains outstanding.

The company successfully completed a consent solicitation for the notes in August.

TMK said that the new consent solicitation is being undertaken to further modify and clarify some covenants so that it can continue to execute its business development strategy and further enhance its flexibility to implement a refinancing plan for its debt.

The company is seeking to:

• Remove the requirement that any new debt issued to refinance existing debt must rank pari passu or be subordinated to the level of the original debt;

• Amend the definition of "refinancing indebtedness" so that TMK may refinance existing debt from anywhere within the group as long as the consolidated amount of debt does not increase;

• Clarify that when refinancing debt, the company can incur the new debt up to five business days before or after the existing debt is actually retired;

• Change the total principal amount of debt allowed under the debt carve-out basket outlined in paragraph h of the definition of "permitted indebtedness" to €70 million from $70 million;

• Clarify that the loan agreement allows TMK the flexibility to repay, prepay, redeem or otherwise retire debt incurred under paragraph i of the definition of permitted indebtedness (with the $100 million debt carve-out basket) at any time, and any principal amount so retired will reduce the principal amount of debt incurred under that paragraph;

• Insert a reclassification clause to allow TMK the ability to, at any time, reclassify any debt that meets the criteria of more than one type of debt; and

• Broaden its ability to agree to limitations on distributions within the loan guarantee of its U.S. assets so that TMK may continue to evaluate opportunities to raise debt capital on terms that are more favorable at the level of its U.S. subsidiaries.

Noteholders will vote on the extraordinary resolution at a meeting at 11 a.m. ET on Jan. 28 in London.

The company is offering a fee of $750 per $100,000 principal amount of notes to noteholders who deliver voting instructions in favor of the extraordinary resolution by the early instruction deadline and a fee of $375 per $100,000 principal amount to noteholders who deliver favorable instructions after this time but before the final deadline.

The payment of these fees is conditioned on the passing of the extraordinary resolution.

The early deadline for giving voting instructions is 11 a.m. ET on Jan. 15, and the final instruction deadline is 11 a.m. ET on Jan. 26.

The fees will be paid no later than the fifth business day following the approval date. The extraordinary resolution will only become effective once this payment is made.

The solicitation agents are UBS Ltd. (contact Mark Watkins at +44 20 7567 0525 or mark-t.watkins@ubs.com) and VTB Capital plc (contact George Niedringhaus at +44 20 3334 8333 or george.niedringhaus@vtbcapital.com). The tabulation agent is Lucid Issuer Services Ltd. (contact Lee Pellicci or David Shilson at +44 20 7704 0880 or tmk@lucid-is.com).

TMK is a Moscow-based pipeline materials manufacturer.

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