Asia Aluminum chairman offers to give 97% stake to noteholders if tender fails, but with conditions

New York, March 2 - Asia Aluminum Holdings Ltd. chairman Kwong Wui Chun said he will give his 97% ownership stake in the company to noteholders if the current tender offer fails.

But Kwong said his offer comes with conditions: the investors would have to guarantee that the company will continue operations and not go into liquidation, that employees will keep their jobs, that banks and suppliers will not incur any losses, and that the noteholders shoulder "corporate social responsibilities."

Kwong made his proposal in a letter to bondholders written in response to negative commentary about the tender offer.

"Ever since the establishment of Asia Aluminum in 1992, I have worked very hard and personally invested no less than HK$3 billion into the company, and this is my entire property," Kwong wrote.

"In the past five years, I have not taken any annual leave and put all my time into the plan in China and maintained intense focus on the business of the company and the building up of the group."

He added: "If investors still do not accept the current proposal, question my motives for putting forward this proposal which was the result of months of hard work, or even misinterpret this effort as a move to enhance my personal wealth," he will give his shares to the noteholders.

Asia Aluminum announced details of the tender on Feb. 17, saying it and AA Investments Co. Ltd. will offer to buy Asia Aluminum's $450 million 8% senior notes due 2011, AA Investment's $355 million 12% senior pay-in-kind notes due 2012 and AA Investment's $180 million 14% senior PIK notes due 2012 as well as 1,706,987 warrants.

For each $1,000 principal amount of the notes, investors will receive $275 for the 8% notes, $135 for the 12% notes and $135 for the 14% notes.

The total payment includes an early participation fee of $50 for notes tendered by 5 p.m. ET on March 10, the early consent date.

Holders tendering PIK notes must simultaneously tender all related warrants.

The companies are soliciting consents to a one-time waiver and amendments to some provisions of the indentures. The one-time waiver would allow them and their subsidiaries to incur debt in China and to grant liens over certain assets, to fund a substantial portion of the total payment and to provide working capital as well as release and waive any and all claims each holder may have arising from or in connection with certain defaults under the indentures. The amendments would eliminate substantially all of the restrictive covenants and many of the events of default.

Holders who tender their notes must also deliver their consents.

The companies said they intend to use financing from Chinese municipal and provincial governments and mainland China banks to help fund the offer and that the availability of the financing depends on the valid tender by holders of at least 90% of the principal amount of the 8% notes and all of the PIK notes by the early consent date.

The companies will not pay accrued interest.

The tender offers will expire at 5 p.m. ET on May 18.

Kwong said the company needed to restructure its debt because of the "financial tsunami" which has virtually halted infrastructure projects and squeezed its liquidity.

The proposed restructuring is, he believes, the best on offer. If holders do not accept the tender offer, he warned, they would likely suffer even bigger losses.

Kwong said his own shareholding will be cut to 30% from 97% and he is giving up a loan of $61.2 million that Asia Aluminum owes to him. Noteholders, he pointed out, will receive cash, while he receives none.

He also said that acquisition of a 50% interest in an aluminum refinery and mining company in Guangxi, China, was made at the request of the banks and government for the restructuring, and was not an attempt to move capital out of the company.

Asia Aluminum is a Hong Kong-based company that makes aluminum extrusion and stainless steel products serving the construction, transportation, industrial and home improvement sectors.

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