Tervita files for Chapter 15 to recognize Canadian reorganization

New York, Oct. 20 – Tervita Corp. said it made a Chapter 15 filing in the U.S. Bankruptcy Court for the Southern District of New York.

The proceedings are intended to provide recognition in the United States of the company’s reorganization under the Canada Business Corporations Act, according to a news release.

Tervita said on Sept. 14 that it had obtained a preliminary interim order from the Court of Queen’s Bench of Alberta under the CBCA. The order includes a stay that prohibits parties other than the company’s revolving credit facility lenders from terminating, making any demand, accelerating, amending or declaring in default or taking enforcement steps under any contract or other agreement because of the filing of the CBCA proceedings.

The company said it entered into an accommodation agreement in connection with the revolver that allows for continued access to that facility and waives events of default that may arise as a result of the CBCA proceedings.

The preliminary interim order allows the Tervita applicants to apply to the court by Oct. 14 for a further order in the proceedings to hold required special meetings for stakeholder votes on the plan.

That order has now been received, the company said on Oct. 17.

A meeting of holders of Tervita’s 9¾% senior notes due November 2019 and 10 7/8% senior notes due February 2018 will be held at 12 p.m. ET on Nov. 30 in Calgary, Alta. and at 12:30 p.m. the same day for holders of its 11 7/8% senior subordinated notes due November 2018.

“Our consensual recapitalization transaction is going as planned,” said Chris Synek, the company’s president and chief executive officer, in the news release.

“We are making excellent progress and expect the recapitalization transaction to close around year-end, which will significantly strengthen our balance sheet.”

As previously reported, the key elements of the recapitalization transaction include:

The creation of a new class of common shares and a new class of preferred shares of Tervita;

The issuance of 48.36 million of the new preferred shares in consideration for an investment of up to C$372 million, the value of which will be adjusted to ensure that Tervita has cash equal to no less than C$75 million immediately after the implementation of the recapitalization;

The issuance of 47.28 million of the new preferred shares in consideration for the exchange of the secured debt held by the transaction sponsors;

Secured debt held by other parties will be repaid in full;

Unsecured noteholders will receive 80% of the new common shares of Tervita;

Unsecured noteholders that execute the support agreement by Oct. 14 will also receive 20% of the new common shares, as additional consideration;

Subordinated noteholders will receive a C$20 million payment. Subordinated noteholders that executed a support agreement by Oct. 14 will receive a share of an additional C$5 million;

Total debt will be reduced by roughly C$2 billion and annual cash interest expense reduced by about C$200 million;

All existing Tervita equity will be exchanged for 20% of the net proceeds from litigation after specified deductions; and

The company will issue $475 million in new debt and reinstate or replace the revolver.

Tervita and the plan sponsors entered into a backstop commitment letter related to the funding of the new share offering.

Tervita is a Calgary, Alta.-based environmental management company for the oil and gas industry.

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