Domtar's exchange offer for four series of notes succeeds, proxy solicitation for Canadian debentures fails

By Angela McDaniels

Tacoma, Wash., Nov. 15 - Domtar Corp. said noteholders submitted tenders for nearly all of subsidiary Domtar Inc.'s 7 7/8% notes due 2011, 5 3/8% notes due 2013, 7 1/8% notes due 2015 and 9½% debentures due 2016 under an exchange offer that expired at midnight on Wednesday.

Specifically, the company received tenders for $599.75 million, or 99.96%, of the 7 7/8% notes, for $348.43 million, or 99.55%, of the 5 3/8% notes, for $399.72 million, or 99.93%, of the 7 1/8% notes and for $124.13 million, or 99.3%, of the 9½% debentures.

Tendered notes will be exchanged for equal amounts of new notes issued by Domtar Corp. with identical interest rates and maturity dates.

The company will also pay accrued interest up to but excluding the settlement date, which is expected to be Monday, and noteholders who submitted tenders and consents by 5 p.m. ET on Oct. 30 will receive a consent payment of $2.50 per $1,000 principal amount of notes.

On Oct. 31, Domtar Corp. announced that it had received sufficient consents to amend the note indentures.

The consents will allow the company to eliminate or modify some restrictive covenants in the note indentures, allow Domtar Inc. to transfer all or most of the capital stock or equity interests of its U.S. subsidiaries to Domtar Corp. or one of its subsidiaries, eliminate Domtar Inc.'s obligation to file reports with the Securities and Exchange Commission or otherwise provide reports to noteholders absent a requirement to file such reports under applicable law and eliminate certain events of default.

The supplemental indentures were executed on Nov. 1, and the amendments will become operative once Domtar Corp. accepts the tendered notes.

Previously, the company said it plans to deregister any notes that remain outstanding after the exchange offer.

Global Bondholder Services Corp. (866 470-3700 or 212 430-3774) was the information agent. J.P. Morgan Securities Inc. (866 834-4666 or 212 834-4077) was the lead dealer manager and solicitation agent, and the co-dealer manager and co-solicitation agent was Deutsche Bank Securities Inc. (866 627-0391 or 212 250-2955).

Proxy solicitation

Domtar Corp. also announced on Thursday that Domtar Inc. did not receive the votes needed to amend the indentures governing its Canadian-dollar denominated 10% debentures due 2011 and 10.85% debentures due 2017.

The debenture holders voted at separate meetings on Wednesday. The proposed amendments included one to provide Domtar Corp. with the right to acquire, at any time, all outstanding debentures in exchange for new securities with identical terms. The company was seeking proxies from holders of at least 66 2/3% of the debentures.

Because the company did not receive the needed votes, debenture holders who submitted proxies by 5 p.m. ET on Oct. 30 will not receive the early consent payment of C$2.50 per C$1,000 principal amount as planned and the debentures will remain outstanding.

On Nov. 6, Domtar Inc. said it had received proxies from holders of $36.25 million, or 44.21%, of the 10% debentures and $33.94 million, or 45.3%, of the 10.85% debentures.

Of those who submitted proxies, 93.53% of the 10% debenture holders voted in favor of the proposed amendments and 95.15% of the 10.85% debenture holders authorized the amendments.

Georgeson Inc. (888 605-8384) was the information agent for the proxy solicitation, and Scotia Capital Inc. (call collect 416 863-7257) was the dealer manager.

Domtar Corp. is a paper company based in Montreal.

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