China Nickel begins exchange offer for convertibles, solicits consents

By Angela McDaniels

Tacoma, Wash., Oct. 19 - China Nickel Resources Holding Co. Ltd. began a consent solicitation and exchange offer for its HK$2 billion of zero-coupon convertible bonds due 2012, according to a company news release.

The company is seeking to remove the Dec. 12 put option. The bondholders will vote at a meeting on Nov. 10. A quorum of two or more people holding at least two-thirds of the bonds is required, and at least three-quarters of the votes cast at the meeting must be in favor of the amendment in order for it to pass.

In the exchange offer, the company is offering HK$20,000 in cash plus HK$100,000 principal amount of new 10% convertible bonds due Dec. 12, 2012 for each HK$100,000 principal amount of convertibles.

The company will issue up to HK$1,405,000,000 of the new convertibles.

The conversion price will be HK$1.541.

The new convertibles will be callable if the company's share price is at least 130% of the early redemption amount divided by the conversion ratio for 20 out of 30 consecutive trading days. There is a change-of-control put option.

If they are not called or put, the convertibles will be redeemed at maturity at 131.1699% of par.

The exchange offer will expire at 11 a.m. ET on Nov. 8.

Currently, HK$1,194,300,000 principal amount of the convertibles is outstanding. The total amount payable on these convertibles if they were put would be HK$1.41 billion. The company said it is holding the consent solicitation and exchange offer in order to improve its capital structure by reducing its cash flow burden and to restructure its long-term debt profile.

China Nickel also said that if the consent solicitation and exchange offer are not successful and it cannot obtain alternative financing, it may be unable to honor its payment obligations if all of the convertibles are put, which would have an adverse impact on its ability to continue as a going concern.

The exchange offer and consent solicitation are conditioned on shareholder approval.

J.P. Morgan Securities (Asia Pacific) Ltd. is the consent solicitation agent.

China Nickel is a Hong Kong-based steel producer.

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