Edcon holders tender for exchange more than 95% of 13 3/8% notes

By Susanna Moon

Chicago, July 15 – South Africa’s Edcon Holdings Ltd. said it holders had tendered for exchange more than 95% of its €425 million of 13 3/8% senior notes due 2019.

The consent deadline for the exchange was 5 p.m. ET on July 14.

As previously reported, Edcon had already received the necessary consents to amend the notes by 5 p.m. ET on July 10, when holders had tendered more than a majority of the notes and submitted consents.

Edcon executed a supplemental indenture, which will go into effect on the settlement date of the exchange offer and consent solicitation.

The withdrawal deadline was set at the time the company achieved the 50% response threshold.

Holders who tendered their notes by the consent deadline will receive the total exchange value, which includes an early consent amount of €50 for each €1,000 principal amount.

The exchange offer and consent solicitation will continue until 11:59 p.m. ET on July 28.

Edcon announced the exchange on June 30, saying it was offering either new super senior 8% PIK notes or new super senior 8% PIK notes, new senior secured 9¾%/12¾% PIK toggle senior secured notes and warrants in exchange for its 13 3/8% notes.

For each €1,000 principal amount of the existing notes, Edcon is offering either €400 of the new super senior PIK notes or €150 of the new super senior PIK notes plus €150 of the PIK toggle notes and warrants for 30% of the issuer’s equity.

The new super senior PIK notes and the new PIK toggle notes will be issued by Edcon Ltd.

Edcon said in a company announcement that the exchange will “significantly decrease” its cash interest expense by cutting its overall debt and giving it the ability to pay interest in kind. The transaction is also intended to improve its near-term working capital and liquidity and facility and amendment, extension or refinancing of other debt that matures in the near term.

Holders of 48.6% of the existing notes had agreed to support the offer.

Completion of the exchange was subject to a minimum participation level of 50% of the existing notes, which has now been satisfied.

The exchange is being carried out jointly by Edcon Holdings and Edcon Bondco Ltd.

In addition to the exchange, Edcon is soliciting consents to amend the note indenture to remove substantially all of the operative covenants.

Because Edcon received consents for more than 90% of the notes it will also be able to reduce the principal amount of the existing notes by 72.5%, change the coupon payment to 5% payable in kind and extend the maturity date to June 30, 2022.

Noteholders are also being asked to support a broader restructuring that will include other debt instruments owned by the holders and may lead to an exchange compromise procedure under section 155 of the South African Companies Act No. 71 of 2008 and a conversion of the cash interest payment due on the notes on June 30, 2015.

Holders who participate in the exchange may choose either of the options on offer or a combination but must tender all the notes that they hold.

The exchange will be carried out in two stages, on the settlement date with a second step on the conversion date, which will be before Dec. 31, 2015 and is expected to be in November.

Holders who choose option A, the €400 of new super senior notes, will have their existing notes along with accrued interest from Dec. 31, 2014 up to but excluding June 30 exchanged for €1,000 of senior 13 3/8% senior PIK notes on the settlement date. These will be exchanged for the €350 of new 8% super senior notes on the conversion date.

Those who pick option B, the notes and warrants, will also have their existing notes, with accrued interest from Dec. 31, 2014 up to but excluding June 30 treated as additional principal, exchanged for €1,000 of senior 13 3/8% senior PIK notes on the settlement date. On the conversion date of Dec. 31, 2015, these notes will be exchanged for warrants, €100 of super senior notes and €150 of senior secured notes. Edcon will have the option to increase the proportion of super senior notes and decrease the senior secured notes.

If less than 90% of the notes had been exchanged, holders of option B notes would have also received warrants exercisable for equity in Edcon Bondco 2 Ltd.

If Edcon’s covenants do not allow it to carry out the option A exchange then those notes will be treated as if the holders had chosen option B.

Lucid Issuer Services Ltd. (+44 20 7704 0880 or edcon@lucid-is.com) is the exchange and information agent.

Edcon is a non-food retailer based in Johannesburg, South Africa.

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