Sherritt offer for 7½%, 8% debentures oversubscribed by early deadline

New York, Sept. 30 – Sherritt International Corp. said it received enough tenders of its C$400 million 8% senior debentures due Nov. 15, 2018 and C$500 million 7½% senior debentures due Sept. 24, 2020 to satisfy the minimum tender condition in its offer for the two series of debt.

As of the early tender date, holders had tendered C$296.7 million of the 8% debentures and C$377.3 million of the 7½% debentures. Both offers are oversubscribed so Sherritt will buy tendered securities on a pro rated basis.

Sherritt added that it also received the necessary consents to amend the two issues of debentures. It needed consents from holders of at least 66 2/3% of each series of notes.

The company further said that it plans to issue up to $300 million principal amount of senior unsecured notes due 2022 on a private placement basis.

Proceeds from the new notes will be used to redeem Sherritt’s 7¾% senior debentures due Oct. 15, 2015.

Sherritt announced the tenders on Sept. 11, saying it planned to purchase the following amounts in the offers:

• Between C$100 million and C$150 million principal amount of its C$400 million 8% senior debentures; and

• Between C$200 million and C$250 million principal amount of its C$500 million 7½% senior debentures.

The total maximum purchase price for each C$1,000 principal amount will be C$1,047.50 for the 8% notes and C$1,032.50 for the 7½% notes tendered by 5 p.m. ET on Sept. 29, the early tender date.

The total maximum payment, or maximum early payment, per C$1,000 principal amount will consist of the early payment of C$1,045 for the 8% notes and C$1,030 for the 7½% notes plus an early consent fee of C$2.50.

Those who tender their notes after the early tender deadline will receive per C$1,000 of notes the base payment of C$1,010 and the regular consent fee of C$1.00 for a total base payment of C$1,011.

The tender offers will end at 5 p.m. ET on Oct. 8, with settlement set for Oct. 10.

Notes tendered by 5 p.m. ET on Sept. 29 could be withdrawn by the early deadline but not afterward; notes tendered after the early deadline may be withdrawn by the end of the offer.

Amendments sought

Sherritt also announced it was soliciting consents to amend the notes so that the covenants and other provisions will be substantially similar to those of a proposed new issue of debentures due 2022, according to a company press release.

If the amendments are approved, Sherritt will no longer be required to use any excess proceeds from the sale of its coal business to repurchase outstanding 2018 debentures or 2020 debentures.

Sherritt plans to issue up to C$300 million principal amount of debentures due 2022, with proceeds used to refinance its 7¾% senior debentures due Oct. 15, 2015.

Proceeds from the sale of Sherritt’s coal business on April 28 will be used to fund the tender offers, reducing Sherritt’s total debt by up to C$400 million, the company said.

The tender offers are conditioned on the execution of a supplemental indenture with the receipt of consents from holders of at least 66 2/3% of each series of notes, the minimum tender amount for each series and the issue of new 2022 debentures.

Other details

The company said that these transactions would slash total debt significantly and strengthen its balance sheet; retain proceeds from the sale of the coal business to enhance liquidity; refinance the 2015 debentures and extend the maturity profile; and reduce the aggregate principal amount of 2018 debentures and 2020 debentures.

After settlement, Sherritt said it would have debentures maturing in 2018, 2020 and 2022 all with principal amounts outstanding in the range of C$250 million to C$300 million.

“These tender offers, along with the proposed new debenture issue to refinance the debentures coming due in 2015, will reduce our total debt and our annual interest payments, improve our debt maturity profile, strengthen our balance sheet and give us the financial flexibility we would like to advance our business,” said David Pathe, president and chief executive officer, in the news release.

“Upon completion, our public debt covenants will better reflect the new Sherritt business structure following the sale of our coal business.”

National Bank Financial Inc. (416 869-8638 or by e-mail at yves.locas@nbc.ca) and Scotia Capital Inc. (416 863-7257 or by e-mail at michael.lay@scotiabank.com) are the dealer managers and solicitation agents. Georgeson Shareholder Communications Canada Inc. (866 374-9876 or by e-mail at askus@georgeson.com) is the information agent, and Computershare Investor Services Inc. (800 564-6253 or by e-mail at corporateactions@computershare.com) is the depositary.

Sherritt is a Toronto-based miner and refiner of natural resources.

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