Stoneway Capital 10% noteholders announce standstill and forbearance

By Caroline Salls

Pittsburgh, May 19 – An informal group holding a substantia majority of Stoneway Capital Corp.’s 10% senior secured notes due 2027 announced a standstill and forbearance agreement related to the company’s failure to pay principal and interest due on the notes on March 1, according to a news release.

The forbearing noteholders said they have a standstill and forbearance agreement in place with Stoneway, its Gramercy Energy Secured Holdings II LLC lender and Gemcorp lenders and Gemcorp Fund I Ltd. and Gemcorp Multi Strategy Master Fund SICAV SCS.

Under the forbearance agreement, the parties will refrain from taking any enforcement action, including the initiation of insolvency proceedings, related to outstanding events of default.

The mezzanine lenders and forbearing noteholders will continue to exercise control over, and may take actions related to, specified Stoneway assets over which control was asserted before May 18, and the forbearing holders will continue to fully control some onshore collateral accounts pledged to them.

In addition, forbearing holders agreed to allow Argentine operating companies to make withdrawals from Argentine onshore accounts for operating expenditures in the ordinary course of business and to allow the disbursement of specified amounts from collateral accounts for legal and other fees and expenses incurred by the parties to the forbearance agreement and their advisers.

Forbearance consideration

In consideration for the forbearance, the company agreed to governance changes, including a unanimous consent requirement for board decisions of its Argentine subsidiaries related to the issuance of securities or related instruments, incurrence of debt, material expenditures, sales, acquisitions or changes to the company’s business or organization and other actions outside of the course of ordinary business or related to contracts, negotiations, pending actions or proceedings.

Stoneway also agreed to grant forbearing holders the right to appoint an observer at the boards of the company and its Canadian subsidiaries, as well as to a requirement for board meetings for decisions related to governance changes, in which such observer will also have a right to attend.

The company also agreed to request express written consent of the majority of the forbearing holders before entering into settlement agreements in connection with pending disputes involving the company to refrain from modifying specified wholesale demand contracts with the Wholesale Electricity Market Administrative Co. (Cammesa) or enter into additional forbearance agreements without the express written consent of the majority of the forbearing holders.

Also, Stoneway agreed to carry out monthly cash sweeps, subject to an agreement on a minimum liquidity amount for operating expenses, beginning on May 31, through which excess cash held by the Argentine subsidiary guarantors will be transferred to collateral accounts, as well as to provide weekly cash reports upon request by the advisers of the forbearing holders and provide copies of all filings in connection with the company’s Duro arbitration and the Siemens disputed matters.

Standstill details

The standstill period began on May 18 and will end on the earlier of a 30-day period, to be automatically extended for two consecutive 30-day periods unless advance notice is provided otherwise, and the date on which the agreement ceases to be in effect as a result of automatic termination events, individual holder termination events or majority holder termination events.

Automatic termination events include bankruptcy filings or insolvency proceedings initiated or ratified by the company, bankruptcy orders entered against the company or a substantial part of its property, some out-of-court liquidation appointments and public statements made by the company repudiating the validity or enforceability of the notes.

Individual holder termination events include a change of control, legal proceedings initiated by revolving credit lenders, a default, breach, termination or similar event related to Stoneway’s obligations under the wholesale demand contracts, an official declaration that the contracts are unenforceable, failure by Cammesa to make payments under the PPAs within a specified period and less than 66 2/3% of the notes outstanding being held by the forbearing holders.

Majority holder termination events include defaults under the notes’ indenture, regulatory actions or legal proceedings and specified adverse outcomes related to the Duro arbitration and Siemens disputed matters.

Upon the occurrence of a majority holder termination event, the mezzanine lenders will have the right to terminate the forbearance agreement.

Stoneway is a privately held New Brunswick, Canada, company based in Buenos Aires and established in 2016 for the purpose of constructing, owning, operating power plants to provide electricity to the wholesale electricity market in Argentina through indirect subsidiaries.

© 2015 Prospect News.
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