TransGlobe holder snubs bid for 5.4% convertibles, makes counteroffer

By Susanna Moon

Chicago, May 23 - Polar Securities Inc. urged noteholders to reject the consent solicitation for TransGlobe Apartment Real Estate Investment Trust's 5.4% extendible convertible subordinated debentures and announced a counteroffer to buy the notes.

Polar is the investment manager of a fund holding about 29.5% of the principal amount of the outstanding convertibles, according to a Polar press release.

As previously reported, TransGlobe plans to solicit consents to amend the notes to permit the trust to redeem them at 101% of par plus accrued interest upon a change of control.

TransGlobe said on May 10 that it planned to solicit consents to redeem the notes under an acquisition agreement with PD Kanco LP and Starlight Investments Ltd.

On May 23, Polar offered to purchase any of the notes that it does not already own for C$106 in cash each plus accrued interest, which the company said is "significantly higher than the price available to debentureholders under the consent solicitation."

Holders who have not delivered consents under TransGlobe's offer and would like to participate in Polar's offer must be of record as of 5 p.m. ET on May 14.

In order to participate, holders must also appoint Polar as their attorney for the purposes of consenting to the solicitation or otherwise exercising the voting rights attached to their notes and assign those rights to Polar, the release noted.

Polar noted in a public statement to holders that the note indenture does not allow TransGlobe to call the notes yet and that, if the amendments are not approved, the only way that TransGlobe can satisfy Starlight's requirement that the debentures be eliminated as part of the privatization is to "defease" them.

Defeasance means that TransGlobe will deposit with the trustee enough funds to pay all of the interest and principal on the notes until Oct. 1, 2016, which is the first date that they may be redeemed under the note terms, the statement explained.

In other words, holders would continue to receive the current yield on their investment, on a risk-free basis, until Oct. 1, 2016, the statement added.

If the notes were to be defeased rather than redeemed, the current value of each note would be significantly higher than the price offered by the consent solicitation or the current market value, according to the statement.

"As investment manager of the largest holder of TransGlobe debentures, we do not support the consent solicitation, which would allow TransGlobe to redeem the debentures at a significant discount to their fair value," Paul Sabourin, chairman and chief investment officer of Polar, said in the release.

"In light of these circumstances, we wish to make public our intention not to consent to the proposed amendments. We strongly urge our fellow debentureholders to do the same."

Consent solicitation

TransGlobe said on May 15 that it expects a change of control to occur with the closing of the privatization. The acquisition is expected to close on June 29.

The amendments to the 5.4% notes require approval from the Toronto Stock Exchange and the consent of holders of at least 66 2/3% of the principal amount of the outstanding notes as of the record date. The record date for the consent solicitation is 5 p.m. ET on May 14.

If the required consents are received, the trust will redeem any outstanding notes concurrently with the closing of the acquisition.

The trust plans to offer holders an early consent fee equal to C$5 per C$1,000 principal amount of notes for consents delivered prior to 5 p.m. ET on June 1 or a regular consent fee of C$2.50 per C$1,000 of notes to holders who consent after the early deadline.

The consent solicitation is subject to the receipt of the required consents, the closing of the privatization transaction and certain other conditions.

In the event that the needed consents are not received and the debentures are not redeemed upon the closing of the transaction, the trust will be required to defease all outstanding notes upon or immediately prior to the closing of the transaction. In that case, no consent fees will be paid, the trust will delist the notes, the notes will no longer be convertible into trust units and holders will only be entitled to receive interest until the maturity or redemption date of the notes, as applicable.

The solicitation is expected to remain open until the earlier of the early consent date, if the necessary consents have been received, and 5 p.m. ET on June 15.

CIBC World Markets Inc. (866-744-2030) is the soliciting dealer manager. Kingsdale Shareholder Services Inc. (866 229-8651 or 416 867-2272 outside North America) is the solicitation agent and information agent.

TransGlobe is a Toronto-based REIT that owns a portfolio of 175 residential rental properties located in urban centers in Alberta, Ontario, Quebec, New Brunswick and Nova Scotia.

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