Otium fails to get bondholder OK to restructure senior bond issue

By Toni Weeks

San Luis Obispo, Calif., July 16 – Otium AS failed to receive bondholder approval to restructure its senior bond issue at a bondholders’ meeting on July 16 in Oslo, according to a notice from trustee Nordic Trustee ASA.

The company announced on July 2 that it was experiencing a challenging liquidity and financial position with difficult market conditions and had begun discussions with its lenders about a restructuring.

The restructuring would include a conversion of all the company’s unsecured debt, including the bonds, into new preference shares. Otium said it would have a right, and the purpose would be, to redeem those preferreds.

The company also expected the restructuring to include liquidity loans from banks, project ring-fencing, intra-group service arrangements, divestiture of mature projects, negative pledge arrangements and establishment of an ad hoc credit group. The company said it would seek new capital through equity injections following approval of the restructuring.

The details of the restructuring had not been finalized as of July 2, but the company held a separate information call on July 15 to provide more information about the restructuring proposal.

At the July 16 meeting, bondholders voted on whether to approve the restructuring. There were sufficient bondholders present at the meeting to form a quorum. The proposed resolution obtained 19.92% of the votes, which was not sufficient to adopt the proposal.

In order to form a quorum, at least half of the bonds needed to be represented at the meeting. In order for the proposal to pass, it had to be approved by the holders of more than two-thirds of the bonds represented at the meeting.

The company also asked bondholders to vote separately on a proposal to allow the company to summon bondholders meetings through Aug. 31, to be held with minimum two business days’ notice. This proposal obtained 77.3% of the votes, and the proposal was adopted.

Prior consent solicitation

As previously reported, the company received bondholder approval in March to

• Extend the maturity date of the bonds to March 31, 2017 from March 31, 2015;

• Pay interest in cash or in kind, with interest due on the original maturity date to be paid in cash.

For cash payments, the interest rate is three-month Nibor plus 500 basis points, payable annually. For PIK payments, the interest rate is three-month Nibor plus 800 bps, payable upon redemption of the bonds or at maturity;

• Amend the call option structure so that the call price gradually increases from the first year until maturity.

The call price is 102 in the first year, stepping up to 103 on July 31, 2016, to 105 on Oct. 31, 2016 and to 107 on Jan. 31, 2017. The bonds will mature on the extended maturity date at 107% of par; and

• Change the denomination of each bond to NOK 1 from NOK 1,000.

Otium is a property developer in the residential, commercial and leisure market. The company is based in Stavanger, Norway.

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