Lecta’s Paper Industries seeks to amend floaters due 2025, asks holders to accede to lock-up

By Marisa Wong

Los Angeles, Oct. 13 – Lecta Ltd. launched a consent solicitation to amend some provisions of the indentures governing indirect subsidiary Paper Industries Intermediate Financing’s outstanding €200 million floating-rate senior secured notes due 2025 (ISIN: XS2114335669, XS2114336550) and its outstanding €55,555,555 floating-rate senior secured notes due 2025 (ISIN: XS2194623109, XS2194623281), according to a notice.

The purpose of the consent solicitation is to facilitate the implementation of a comprehensive refinancing package agreed on Oct. 12 with various parties, including a group of shareholders and senior secured creditors.

In a separate notice on Friday, Lecta announced that holders of the 2025 senior secured notes and holders of the debt under its super senior facilities agreement and the group have executed a lock-up agreement, under which the parties agree to support the implementation of the comprehensive refinancing package. The company is encouraging all noteholders and lenders who have not yet signed the lock-up agreement to accede to it as soon as possible.

Consent bid proposals

Under the proposed amendments, Paper Industries intends to modify each of the indentures governing the notes mainly to

• Permit the incurrence of additional secured debt to be made available by creditors under a new money notes purchase agreement in order to strengthen the group’s cash position and ensure continued access to liquidity to support its efforts in investing, transforming and expanding operations in line with the group’s business plan; make corresponding amendments to the intercreditor agreement to permit the secured obligations under the new money notes purchase agreement; and make some amendments regarding the calculation of the outstanding notes for purposes of voting thereunder; and

• Amend the governing law and jurisdiction of the indentures and the notes from the State of New York to the laws of England and Wales; amend the jurisdiction clause of the indentures and the notes from the federal court in the borough of Manhattan, New York City, and any appellate court thereof, to the non-exclusive jurisdiction of the courts of England and Wales; and accede Lecta Paper UK Ltd. as co-issuer of the notes under each of the indentures.

Solicitation details

Adoption of the proposed amendments under each of the indentures requires the consent of holders of a majority in aggregate principal amount of the outstanding notes.

Following receipt of the required consents prior to the expiration time of the consent solicitation, a supplemental indenture to each of the indentures will be executed, and the proposed amendments will become effective.

Consents may be revoked prior to the effective time.

The consent solicitation expires at 11 a.m. ET on Oct. 23.

The information and tabulation agent is Kroll Issuer Services Ltd. (+44 20 7704 0880; attn.: Oliver Slyfield / Victor Parzyjagla; lectaltd@is.kroll.com).

Lock-up agreement accession

Lecta said the lock-up agreement marks an important step in its efforts to implement the proposed refinancing transaction, which will position the company to continue to overcome challenges presented by the current weak market environment, helping to deliver the transformation towards specialty papers and to emerge with a solid liquidity position and healthy balance sheet.

The company said all 2025 senior secured noteholders and super senior facilities agreement lenders who wish to support the proposed transaction but have not yet signed up to the lock-up agreement should complete and execute an accession letter to the lock-up agreement and to provide evidence of their beneficial holdings to the information agent, Kroll, as soon as possible.

Noteholders and lenders acceding to the lock-up agreement by the applicable deadlines and complying with the relevant requirements set out in the lock-up agreement will be entitled to the following consent fees:

• For noteholders and lenders acceding by 11 a.m. ET on Oct. 23, an early bird fee; and

• For those acceding by noon ET on Nov. 17, a general consent fee.

Each of the early bird fee and the general consent fee are equivalent to an amount equal to 0.5% of the aggregate principal amount of that noteholder or lender’s locked-up debt (excluding new money debt). Details of the fees are set out in clause 13 of the lock-up agreement.

Additional announcements in relation to the proposed transaction will be available through the website set up by the information agent: https://deals.is.kroll.com/lectaltd.

Proposed refinancing

As a recap, the refinancing agreement will include “a significant extension” of the maturities of the company’s super senior debt comprised of an existing revolver and term loan and the existing senior secured notes due 2025.

The company will be extending the credit facility debt to the first quarter of 2028.

There will be a 1% consent fee to be paid in kind.

The existing notes will be exchanged into a single tranche of €258 million of new senior secured notes with a maturity in the third quarter of 2028, with interest payable in kind.

The notes will have cash interest at Euribor plus 650 basis points.

There is an early bird consent fee of 0.5%, payable in kind.

New money

As reported, Lecta will also be receiving €78 million of new money under a new facility, in the form of tradeable notes maturing in the first quarter of 2028. The new notes will be senior to the senior secured notes but junior to the super senior credit facility. Proceeds will be used to fund capex, as the company pivots toward an increased share of specialty papers in growth markets.

There is also a €25 million uncommitted delayed-draw tranche for backstop investors.

The new money facility will be discounted to 96. The backstop will have a 4% discount, to be paid in kind.

Interest will be at Euribor plus 800 bps.

The company is also issuing warrants for shares in the company equal to 5% of the fully diluted share capital to participants in the new money facility pro rata of their commitments.

As of Thursday, the company had already received binding commitments from certain securityholders.

The company also entered into an equity commitment letter and a backstop letter with certain shareholders to commit to and fully backstop the issuance of the new money facility.

Lecta is a Barcelona, Spain-based manufacturer of specialty paper, coated paper and other high value-added paper products.

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