Mandalay pulls tender for 5 7/8% exchangeables; meeting adjourned

By Susanna Moon

Chicago, May 12 – Mandalay Resources Corp. said that Gold Exchange Ltd., an unaffiliated special purpose vehicle incorporated in Jersey, has withdrawn the repurchase offer for its $60 million principal amount 5 7/8% secured exchangeable bonds due in 2019.

Also, Mandalay “indefinitely” adjourned the bondholder meeting set for 5 a.m. ET on May 12, according to a company update on Friday.

GEL has been in talks with bondholders for “implementing alternative arrangements ... substantially similar to those that were originally proposed” and has obtained “unanimous support” for those plans, the release noted.

The company said on April 19 that it was offering to purchase up to $30 million principal amount of the bonds at a price of $52,500 for each $50,000 principal amount.

The bonds were issued in 2014, with proceeds loaned to a subsidiary of the company.

The tender offer and consent solicitation had been set to end at 11 a.m. ET on May 10.

Under the concurrent consent solicitation, GEL was seeking bondholder approval to extend the maturity by three years to May 13, 2022.

In return, the issuer was offering to raise the coupon to 6.375% from 5.875% and reduce the exchange price of the bonds to $135.00 from $149.99.

The proposed amendments also included the following:

• Deleting a condition of the bonds that requires that beginning on May 14, as additional security for the bonds, GEL is required to start depositing into a custody account, the aggregate number of shares of the SPDR Gold Trust issuable upon exchange of the bonds; and

• Adding a new covenant to the bonds in which GEL will be required to offer to repurchase a proportion of the bonds outstanding.

The early consent fee was 1% and the late consent fee was 0.5%.

The deadline for receiving the early consent fee was 11 a.m. ET on April 28, and the deadline for appointing a proxy was 11 a.m. ET on May 10.

Beginning May 14, the issuer is required to start acquiring gold shares and depositing them in a custody account for the benefit of bondholders, the company explained. Mandalay Resources would effectively be required to fund these purchases, which would result in the company “indirectly paying interest on the bonds while holding increasing amounts of non-yielding gold shares, rather than being able to productively invest the funds in its business.”

Instead, the proposal to bondholders would “better align anticipated growth opportunities with an efficient balance sheet.”

The issuer previously said it would not accept any bonds for repurchase if it failed to collect electronic voting instructions for the proposal from holders of at least 75% of the bonds by the end of the offer.

The company’s stock (Toronto: MND) closed at C$0.59 on April 18.

The dealer manager and solicitation agent is KNG Securities LLP (nnugent@kngsecurities.com or +44 20 7426 2602).

The repurchase agent and principal paying, transfer and exchange agent is Bank of New York Mellon, London Branch (debtrestructuring@bnymellon.com or +44 1202 689644).

Mandalay Resources is a Toronto-based natural resource company with a focus on gold, copper, silver and antimony projects.

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