China's Asia Aluminum may cancel tender offer for 8%, PIK notes unless holders tender soon

By Angela McDaniels

Tacoma, Wash., March 4 - Asia Aluminum Holdings Ltd. and AA Investments Co. Ltd. amended the tender offer and consent solicitation for Asia Aluminum's $450 million 8% senior notes due 2011 and AA Investments' $355 million 12% senior pay-in-kind notes due 2012, $180 million 14% senior PIK notes due 2012 and warrants on Wednesday.

Specifically, the companies said that if they do not receive tenders and consents for at least 90% of Asia Aluminum's notes and all of AA Investments' notes and warrants by the early tender deadline, they will not pay any early participation consideration and may terminate the offer.

The early tender deadline is 5 p.m. ET on March 10. The offer began on Feb. 17 and will expire at 5 p.m. ET on May 18.

When the offer began, the companies said they planned to use financing from China's municipal government to help fund the offer and that the availability of the financing depends on the tender by holders of at least 90% of the 8% notes and all of the PIK notes by the early consent date.

The companies are soliciting consents to a one-time waiver and amendments to some provisions of the indentures that would eliminate substantially all of the restrictive covenants and many of the events of default.

The waiver would allow the companies 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 some defaults under the indentures.

Holders who tender their notes must also deliver their consents.

Holders tendering PIK notes must simultaneously tender all related warrants, with the number of warrants representing at least the required pro rata number of warrants based on the original ratio of PIK notes and warrants issued, which is 2.86643 warrants per $1,000 principal amount for the 12% notes and 1.36748 warrants for the 14% notes.

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

The total payment includes an early participation fee of $50 for notes tendered by the early tender deadline. No accrued interest will be paid.

Going concern in question

Shortly before the offer began, the companies said they have experienced declining revenue and cash flow as well as increasing pressure on available working capital facilities due to global macroeconomic conditions and were preparing a tender offer and consent solicitation in order to restructure debt.

Then on Feb. 20, the companies said there could be doubt about their ability to continue as a going concern in light of their current financial condition and liquidity.

In addition, Asia Aluminum said it was in default on financial covenants contained in some of its bank facilities as of Dec. 31 and that any acceleration of those facilities would trigger a cross-default on substantially all of its existing debt, including the notes.

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

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