China Oriental tenders for $111.37 million 7% senior notes due 2017

By Susanna Moon

Chicago, Jan. 25 – China Oriental Group Co. Ltd. said it is tendering for its $111,368,000 principal amount of outstanding 7% senior notes due 2017.

The total purchase price will be $985 for each $1,000 principal amount of notes tendered by 5 p.m. ET on Feb. 5, the early tender date. The total amount includes an early tender premium of $50 per $1,000 of notes.

Holders who tender their notes after the early deadline will receive $935 per $1,000 of notes.

The tender offer will end at 5 p.m. ET on Feb. 22, with settlement set for Feb. 29.

The company also is soliciting consents to amend the notes to eliminate substantially all of the restrictive covenants in the notes indenture and to modify events of default.

The proposed amendments require the consent from holders of at least a majority of the outstanding notes, excluding those owned by or beneficially held for the company or an affiliate.

Holders who tender their notes will be deemed to have given consents to the proposed amendments. They may not deliver consents without tendering their notes.

The purpose of the tender offer and the consent solicitation is to reduce the company’s debt and to try to eliminate substantially all of the restrictive covenants and modify events of default in order to maximize the company’s flexibility in its operating and financing strategies, according to a company news release.

The tender offer is subject to a financing condition.

The offer will be funded by the company’s cash and cash equivalents, notes receivable to be converted into cash with some discounts and drawdowns on credit facilities.

The company said it reserves the right to offer to exchange or repurchase notes, in individually negotiated transactions or in an offer to holders, or to issue a new offer for holders to exchange or tender notes for repurchase, in each case on terms that may be more or less favorable than those of the offer.

“Given the continuing operating challenges for steel manufacturers in the PRC, the company would need to increase financial flexibility which currently is heavily restricted by the covenants under the indenture,” the news release said.

The offer also provides an opportunity for holders to gain liquidity for the notes that might not otherwise be available to them.

Deutsche Bank AG, Singapore Branch (+65 6423 5934, +44 0 207 545 8011 or liability.management@db.com) is the dealer manager and consent solicitation agent. Lucid Issuer Services Ltd. (Thomas Choquet, +44 0 20 7704 0880 or chinaorientalgroup@lucid-is.com) is the information and tender agent.

The company issued the notes on Nov. 17, 2010.

In October 2012 and February 2015, the company said it took in tenders for $87,240,000 and $65,067,000 principal amount of the notes, respectively. From November 2014 to December 2015, the company purchased $36,325,000 principal amount of the notes via open market purchases.

China Oriental is an iron and steel producer is based in Hong Kong.

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