Mexico's Axtel wraps exchange offers for 7 5/8% notes and 9% notes

By Susanna Moon

Chicago, Jan. 29 - Axtel, SAB de CV said investors tendered $142.01 million, or 51.64%, of 7 5/8% senior notes due 2017 and $355,426,000, or 72.54%, of 9% senior notes due 2019 by the end of the offer at 11:59 p.m. ET on Jan. 28.

In the exchange offer, Axtel will issue $248,653,000 principal amount of its senior secured notes due 2020 and Ps. 283,533,200 (or $22,189,690, converted into dollars at an exchange rate of 12.7777 Mexican pesos per dollar) principal amount of its peso-denominated senior secured convertible dollar-indexed notes due 2020, and pay $82,564,980 in cash, according to a company press release.

Settlement will occur on Jan. 31. The exchange offers began Dec. 26.

As noted before, the exchange offers were held through wholly owned subsidiary Axtel Capital, SA de CV Sofom ENR for Axtel's outstanding $275 million 7 5/8% notes and its $490 million 9% notes.

The company obtained 65% participation by the early tender deadline of 5 p.m. ET on Jan. 24.

Offer changes

On Jan. 14, Axtel said it extended the early tender date and amended its exchange offers based on discussions with bondholders, noting that parties who manage the two largest bond holdings were now supporting and participating in the exchange offers.

Holders were offered a combination of senior secured notes due 2020, peso-denominated senior secured convertible dollar-indexed notes due 2020 and cash.

The company also solicited consents to amend the notes to eliminate substantially all of the covenants other than the covenant to pay principal and interest when due and to eliminate most events of default.

Holders who tendered their notes will be deemed to have consented to the proposed amendments.

For each $1,000 principal amount of old notes tendered by the early tender date, holders will receive $500 principal amount of senior secured notes, Ps. 570 principal amount of convertible notes, $50 cash and a $116 consent payment. Converted using an exchange rate of 12.7777 pesos per dollar, the payment is $710.61.

Holders who tendered after the early tender date will not receive the consent payment. In this case, the payment is $594.61 per $1,000 principal amount of notes.

Prior to the changes, the payment for each $1,000 principal amount of old notes tendered by the early tender date was going to be $650 including $466 principal amount of senior secured notes, Ps. 439 principal amount of convertible notes, $50 cash and a $100 consent payment.

Note terms changed

The company also made some changes to the terms of the new notes:

• The initial interest rate is 7%. It will increase to 8% on the first anniversary of the issue date and to 9% on the second anniversary. Before, the interest rate was going to remain 7% with no step-up;

• Beginning Jan. 31, 2016, the company will be entitled to redeem all or a portion of the senior secured notes at 106.75. The redemption price will decline to 104.5 on Jan. 31, 2017, to 102.25 on Jan. 31, 2018 and to par on Jan. 31, 2018;

• Prior to Jan. 31, 2016, the company may use the proceeds from one or more equity offerings to redeem up to 35% of the senior secured notes. The redemption price is 107 in year one, 108 in year two and 109 in year three;

• The convertibles will be non-callable for three years. Beginning Jan. 31, 2016, they will be callable at a redemption price equal to 200% of the principal amount plus accrued interest and including additional amounts payable in respect of such payment. In addition, on and after Jan. 31, 2016, in the event that the market price of Axtel's ordinary participation certificates exceeds 200% of the Dec. 21 conversion price of Ps. 2.41 in at least 20 of the past 30 trading days, Axtel will be entitled to redeem the convertibles at a redemption price equal to 100% of their principal amount plus accrued interest and including additional amounts payable in respect of such payment; and

• So long as the senior secured notes are outstanding, the indenture governing the convertibles will not include restrictive covenants. If the convertibles remain outstanding at any time that the senior secured notes are not outstanding and the senior secured notes indenture is not in effect, the company will enter into a supplemental indenture to include in the convertibles such restrictive covenants as are in the senior secured notes indenture.

Other details

The convertible notes are indexed to dollars and, unless a holder requests otherwise, payable in dollars.

The new notes will mature on Jan. 31, 2020 unless more than $125 million 9% notes are outstanding on June 22, 2019, in which case the new notes will mature on June 22, 2019.

The maximum amount of cash, senior secured notes and convertible notes to be issued in the exchange offers and consent solicitations was $114.8 million, $356.5 million and Ps. 335.5 million, respectively.

The exchange offers and consent solicitations were conditioned on the receipt of consents representing a majority of each series of notes and the concurrent completion of the sale-and-leaseback transaction with MATC Digital.

The company noted on Jan. 25 that it signed definitive agreements with MATC Digital, S de RL de CV, a subsidiary of American Tower Corp., for the sale of 883 telecommunication sites for about $250 million. The sale was conditioned on and expected to occur concurrently with the closing of the exchange offers on Jan. 31.

The exchange offers were made only to qualified institutional buyers under Rule 144A or accredited investors under Rule 501(a) or to those who are not U.S. persons under Rule 902.

D.F. King & Co., Inc. (800 967-4612, 212 269-5550 or axtel@dfking.com) is the information agent.

Axtel is a fixed-line integrated telecommunications company based in San Pedro Garza Garcia, Mexico.

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