RusForest gets holder OK to cut coupon, bond amount; maturity now 2018

By Susanna Moon

Chicago, Jan. 25 - RusForest AB said bondholders agreed to reduce the coupon of its bonds due 2014 to 0% and to extend the maturity to 2018.

The principal amount and accrued interest of the bonds, issued in 2011, also was cut by about half to SEK 263.75 million, according to a company press release.

The bondholders meeting was held on Jan. 25.

Bondholders representing about 88.4% of the bonds' nominal amount before the reduction participated in the bondholders' meeting. About 86.7% of the bonds represented at the meeting voted in favor of the board of directors' proposal.

The company's restructuring is conditioned on shareholder approval on Feb. 1 and continues with the debt-to-equity swap, the rights issue and the directed new share issue, the release noted.

RusForest said it began a broad strategic and financial review in August that resulted in a restructuring proposal announced on Dec. 12.

Restructuring

On Jan. 7 RusForest said Indufor Oy had been appointed to conduct an independent liquidation analysis of RusForest in an effort to help bondholders decide whether to support the company's proposed restructuring.

The company said its board of directors believed that the proposal delivers maximum value to all stakeholders. The proposal also has the support of largest shareholder Vostok Nafta, according to a previous press release.

In order to provide bondholders with more comprehensive information, CorpNordic and the company have agreed to engage Indufor to perform an independent liquidation analysis.

RusForest said the final report is expected to be available by Jan. 15, in advance of the bondholders' meeting.

Restructuring details

As previously noted, the company's bondholders were asked to reduce the bond amount and to convert the reduced bond into newly issued shares in RusForest at SEK 0.04 per share.

The debt reduction and the conversion to shares would give bondholders about 93% ownership of RusForest if all bondholders convert to shares, the company previously said.

Given that the company has limited cash and that operations are still cash flow negative, RusForest said shareholders were asked to inject SEK 86 million in a guaranteed rights issue, and Nova Capital LLC was asked to inject about SEK 100 million in a directed issue at SEK 0.03 per share.

Following the injection of new capital, previous bondholders would own roughly 50% of RusForest. The pro forma market capitalization of RusForest at SEK 0.03 per share is SEK 400 million, the previous release noted.

Rejection consequences

If the proposal was rejected, the company could have faced an insolvency situation in the first quarter of 2013, the board of directors previously said.

As reported, RusForest's balance sheet is under review. An impairment of up to SEK 500 million is expected in the year-end financials, to be released March 15.

The company said it has minimal cash remaining and has not been able to sell any assets since new management joined in August.

RusForest said it also has about SEK 186 million of secured debt in addition to the SEK 500 million of unsecured corporate bonds. The company said it would likely require additional secured credit facilities in the first quarter.

Additionally, the company said an insolvency situation could jeopardize its forestry leases, which are the most valuable part of RusForest's balance sheet.

RusForest is a Swedish forestry company operating in eastern Siberia and the Arkhangelsk region of Russia.

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