Russia’s Brunswick: Amalgam gets shareholder support for buyout offer

By Susanna Moon

Chicago, Feb. 2 – Brunswick Rail Ltd. said it has been notified that Amalgam Rail Investment, Ltd. has obtained support for its Dec. 31 buyout offer from shareholders of more than half of its common shares.

As a result, Amalgam is in a position to close out the offer and intends to use the compulsory acquisition provisions of its shareholders agreement dated March 25, 2014 to acquire the company's common shares, according to the notice by Brunswick.

Brunswick said on Nov. 15 that it planned to sell off a majority of its equity stake, which would likely trigger a put option under the $600 million 6½% guaranteed notes due 2017 issued by Brunswick Rail Finance DAC.

Proxima Capital Group is the financial adviser to the ad hoc shareholders committee of Brunswick Rail Ltd. and is marketing for potential investors to acquire up to 100% of the company's equity.

As announced July 1, Brunswick Rail Ltd.’s planned exchange offer for Brunswick Rail Finance Ltd.’s $600 million of 6½% guaranteed notes due 2017 was rejected by an informal group of noteholders.

Noteholder challenge

As announced Jan. 27, Brunswick Rail Finance DAC had picked up a counter purchase offer from a third-party bidder to the one put forth by an ad hoc group of noteholders, which the group contends is sub-par because it could trigger a put option.

Specifically, the sale could trigger the change-of-control terms under the company’s $600 million 6½% guaranteed notes due 2017.

The third-party bidder has signed into an exclusivity arrangement with a minority of the company's shareholders, according to a release by the noteholder group.

“The group understands that this offer has been communicated to all shareholders,” the bidder said.

The offer comes despite a “significantly increased indicative offer” on Dec. 2 from the noteholder group along with Macquarie Russia & CIS Infrastructure Fund after the initial bid on Nov. 25 to purchase 100% of the shares, the release said.

The noteholder group maintains that its offer is the “most attractive” for the company and its stakeholders because it

• Has the backing of the company's creditors that include “buyers who can deliver a clean exit” for shareholders and other stakeholders;

• Offers shareholders “significant value given the impending maturity of the notes in November 2017”; and

• Provides for a “comprehensive solution to the company's capital structure.”

The holder group said that, meanwhile, any other equity offer that excludes the “support” of the noteholder group puts the company in a “very precarious position.”

Specifically, the sale of a majority of the company's equity interests to a third-party bidder would constitute a change of control under the note terms, allowing for a put option at 101% plus accrued interest and step-up interest.

“Consequently, despite certain shareholders being unwilling to accept the group's revised offer, the group has continued to work to formalize its offer along with MRIF to incorporate the key terms for the company's overall restructuring and secure binding lock up agreements from all the relevant parties.

“The group hereby notes that it has [made] significant progress in such regard and expects to conclude this process imminently. Accordingly, the group encourages shareholders to engage with it in active discussions with a view to reaching a consensual agreement among all parties.”

For questions, contact PJT Partners (+44 20 3650 1100, Gudgeon@pjtpartners.com Whittaker@pjtpartners.com) or Shearman & Sterling LLP (+44 20 7655 5000 or solomon.noh@shearman.com).

Brunswick Rail is a railcar operating lessor based in Moscow.

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