Russia's Severstal fulfills tender offer terms with new notes issue

By Susanna Moon

Chicago, Oct. 26 - JSC Severstal said it has satisfied the funding condition for Chatham Enterprises Ltd.'s tender offer for $1.25 billion 9¾% loan participation notes due 2013 issued by Steel Capital SA to finance a loan to Severstal.

Steel Capital has issued $1 billion loan participation notes due 2017 issued as series 1 under the $3 billion program for the purpose of financing loans to Severstal.

The offer was conditioned on the issue of new dollar-denominated bonds.

Severstal noted on Oct. 13 that Chatham Enterprises would buy $700 million of the notes, up from $450 million, and fixed the clearing price in the offer.

A clearing price of $1,125.00 per $1,000 principal amount of notes will allow that target amount to be reached, the company said. However the actual price will not be set until the previously scheduled announcement date.

By the early expiration deadline, holders had tendered $875.9 million of the notes.

The tender was announced on Sept. 30.

At that time, Severstal said the payment for each $1,000 principal amount of notes will be determined through a modified Dutch auction. The minimum offer price is $1,097.50, and the maximum offer price is $1,127.50, according to a company news release.

The prices noted above include an early tender payment of $30.00 for each $1,000 principal amount of notes tendered by the early expiration deadline, which is noon ET on Oct. 13.

Chatham will also pay accrued interest up to but excluding the settlement date, which is expected to be Oct. 28.

Noteholders have the option to submit offers on a non-competitive basis, and any such offer will be deemed to have specified the minimum offer price.

If the offer is oversubscribed at the clearing price, the notes will be accepted on a pro rata basis.

The offer will expire at noon ET on Oct. 27.

Notes purchased in the offer will be delivered to Steel Capital and canceled.

The company said the purpose of the offer and the issue of the new notes is to allow Severstal to take advantage of current favorable market conditions and extend its overall liability profile.

The dealer managers are Barclays Bank plc (+44 020 7773 8575 or eu.lm@barcap.com), Goldman Sachs International (+44 0 20 7774 4799 or liabilitymanagement.eu@gs.com) and Royal Bank of Scotland plc (+44 0 20 7085 8056 or liabilitymanagement@rbs.com).

The Regulation S tender agent is Lucid Issuer Services Ltd. (+44 0 20 7704 0880, Attention: Yves Theis, or severstal@lucid-is.com), and the Rule 144A tender agent is Global Bondholder Services Corp. (212 430-3774 or 866 470-3800).

Severstal is a Cherepovets, Russia-based steel producer.

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