Treofan launches exchange offer for 11% notes in restructuring deal

By Caroline Salls

Pittsburgh, Aug. 19 - Treofan has launched an offer to exchange its 11% second-lien notes due 2013 for ordinary shares of Treofan Holdings GmbH as part of a restructuring agreement reached on July 3 with holders of more than 90% of the notes, as well as the company's revolving credit facility lenders and major indirect shareholders, according to a company news release.

Along with the exchange offer, Treofan Holdings is offering €10 million of profit participation rights to noteholders.

Profit participation rights will be convertible into preference shares at anytime at the option of the holders.

If all of the profit participation rights are converted on the closing date, the resulting preference shares in the Treofan Group would represent 21.19% of the total issued share capital.

Treofan said the consenting noteholders have agreed not to subscribe to any profit participation rights in the offering, although other noteholders that tender all of their notes in the exchange offer may subscribe.

Additionally, Treofan Holdings will have the right to require all holders of profit participation rights issued in the offering and/or holders of preference shares to subscribe for €5 million total nominal amount of additional profit participation rights if the company's supervisory board needs the additional capital for short-term liquidity and/or working capital requirements.

Indenture changes

Treofan Germany GmbH & Co. KG is also soliciting consents to amend the notes indenture to reduce the principal amount of the outstanding notes by 90%, reduce the interest rate payable on the notes to 1% from 11%, extend the maturity of the notes to 2033 from 2013, eliminate of all restrictive covenants and release of all guarantees of the notes and collateral securing the notes.

Offer details

The exchange offer will expire on Sept. 18, and the settlement date is expected to be Sept. 29.

The company said the restructuring agreement will be terminated if it the restructuring is not completed by Oct. 31 or in the event of a bankruptcy, insolvency or breach of the agreement by any Treofan entity.

The closing of the exchange offer is subject to the valid tender of at least 95% of the outstanding principal amount of the notes.

Under the restructuring agreement, holders of more than 90% of the outstanding principal amount of the notes have agreed to validly tender their notes and deliver the corresponding consents to the proposed amendments.

In addition, Treofan said it has been informed by some holders of a majority of the notes that they have entered into agreements for the purchase of additional notes representing more than 5% of the total outstanding principal amount. The noteholders will also validly tender these additional notes.

As a result, Treofan said its management believes that the 95% consent threshold for the amendments will be met and that the minimum tender condition will be satisfied.

Interest payment extended

As part of the financial restructuring, on July 8, Treofan launched a consent solicitation under which the Aug. 1 interest payment on the notes was extended to Oct. 31, subject to completion of the financial restructuring.

Holders representing 96.67% of the principal amount of notes outstanding gave their consent in this consent solicitation, and the amended indenture took effect on July 28.

Revolver warrants

The parties to the restructuring agreement have also agreed that the lenders under Treofan's revolving credit facility would receive, depending on the length of time required to refinance the facility, a specified number of warrants exercisable for ordinary shares.

If the revolving credit facility is refinanced only on or after July 1, 2010, then the senior lenders would receive warrants that would entitle them to 13% of the total share capital of Treofan Holdings.

Also under the restructuring agreement, the senior facility agreement governing the revolver will be amended to extend its maturity by one year to July 31, 2011, increase the applicable margin to 6.5% and reset financial covenants to provide for headroom.

According to a previous release, upon the closing of the exchange offer, the shareholding of existing shareholders will be diluted to 8.57% of the issued share capital in Treofan Holdings, and the tendering noteholders will own 91.43% of the issued share capital.

Treofan said it expects Management & Capitali SpA, a consenting noteholder with a significant percentage of the outstanding principal amount of the notes, to become the company's largest shareholder, with a shareholding in excess of 40% of the share capital.

Treofan is a polypropylene film manufacturer based in Raunheim, Germany.

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