Solvay issues clean-up call after tender offer; consent bids successful

By Marisa Wong

Los Angeles, Sept. 6 – Solvay SA has exercised the clean-up call option under its outstanding 5.869% undated deeply subordinated fixed-to-reset rate perpetual non-call 8.5-year bonds with a first optional redemption date on June 3, 2024 (ISIN: XS1323897725), according to a Wednesday press release.

Solvay is exercising the clean-up call option after having received tenders for more than 90% of the bonds under its tender offer launched Aug. 4.

The tendered bonds are to be purchased on Sept. 8.

The remaining bonds not purchased under the tender offer will be redeemed on Sept. 13 at par plus accrued interest.

The issuer said it will request the Luxembourg Stock Exchange to cancel listing of all the outstanding bonds on the redemption date.

Tender offer results

Solvay announced late in the day on Tuesday that bondholders had tendered €452,613,000, or 90.52%, of the €500 million of 2024 perpetual bonds, leaving €47,387,000 outstanding.

The issuer was offering a purchase price of €1,017.50 per €1,000 principal amount, inclusive of a €17.50 early tender fee that will only be paid to holders who delivered tender instructions by the early tender deadline.

The early tender deadline was previously extended to 11 a.m. ET on Sept. 5 (the final deadline) from 11 a.m. ET on Aug. 22.

Interest will also be paid to the Sept. 8 settlement date.

The tender offer was conditioned on the success of the concurrent consent solicitations and Solvay implementing the extraordinary resolution. However, the implementation condition has been waived.

Consent solicitations

Solvay had launched on Aug. 4 concurrent liability management exercises, including the tender offer as well as consent solicitations and a prospective exchange offer.

Solvay was soliciting consents from bondholders to separate into two independent publicly traded companies.

The partial demerger will result in one entity that will keep the Solvay name and a new entity called Syensqo.

The new Solvay entity will be comprised of the mono-technology business in the chemical segment, including soda ash, peroxides, silica and coatis and specialty chem. Syensqo will have the materials segment, covering novecare, technology solutions, aroma performance and oil and gas solutions, broadly specialty polymers and composite materials. Both companies are expected to be rated investment grade.

Solvay was soliciting consents to substitute the issuer on three series of bonds and amend the conditions. The company was also asking for a waiver relating to the partial demerger.

Solvay had extended the early instruction deadline to 11 a.m. ET on Aug. 31 from 11 a.m. ET on Aug. 22.

Consent solicitations covered the following bonds:

• €500 million undated deeply subordinated fixed-to-reset rate perpetual non-call 5.5-year bonds with a first call date on Dec. 2, 2025 (ISIN: BE6324000858);

• €500 million 2.75% fixed-rate bonds due Dec. 2, 2027 (ISIN: BE6282460615); and

• €600 million 0.5% fixed-rate bonds due Sept. 6, 2029 (ISIN: BE6315847804).

The company offered to pay an early participation fee of 0.25% of the nominal amount of bonds. The consent fee is only being paid if the extraordinary resolution passes and has been implemented.

Success of consent bids

Bondholder meetings were scheduled to be held at the company’s offices in Belgium on Sept. 5 starting at 5 a.m. ET.

The extraordinary resolutions required that three-quarters of the participants vote in favor of the proposals.

Quorums for the hybrid bonds and the 2029 bonds consisted of holders of at least 75% of the bonds, and the quorum for the 2027 bonds was half of the bondholders.

The consent solicitations were deemed successful for the 2025 bonds and the 2027 bonds as both meetings were quorate and the extraordinary resolutions passed, according to a notice on Tuesday.

For the bonds due 2029, the consent solicitation has been terminated.

Further steps: 2029 bonds

As reported Tuesday, votes cast in favor of the extraordinary resolution representing less than 3% of the total nominal amount for the 2029 bonds may not have been validly exercised.

Therefore, the company cannot confirm that the required 75% majority was reached.

Solvay is also investigating internally the circumstances of a trade between third parties on the 2029 bonds.

Solvay shifted direction for the 2029 bonds and will exercise a make-whole call for the issue.

The redemption will be funded with bank facilities already in place.

The additional funding cost for the anticipated long-term refinancing of the 2029 bonds is estimated at about €20 million per year (after tax).

The relevant redemption date will be announced as soon as practicable.

Upcoming exchange

As previously reported, Solvay expects to launch exchange offers and consent solicitations for bonds issued by Solvay Finance (America) LLC and Cytec Industries Inc. in early September.

In terms of an exchange, holders of some of the outstanding securities will be given the opportunity to transfer their securities to a new Syensqo entity (preliminary: Baa1/BBB+), the stronger-rated of the two entities post separation.

The rationale for the upcoming exchange offer is that the partial demerger is expected to be effective in December and the first optional redemption date for the bonds listed below is June 3, 2024.

The company deems it more efficient to purchase the bonds by way of an exchange offer rather than undertake a different liability management exercise.

The exchange exercise will cover the:

• $800 million 4.45% senior bonds due 2025 issued by Solvay Finance (America) and guaranteed by Solvay (Cusips: 834423AB1, U8344PAB5); and the

• $163,495,000 outstanding of the $250 million 3.95% senior bonds due 2025 issued by Cytec and guaranteed by Solvay (Cusip: 232820AK6).

The company said in a prior announcement that it expects to launch the exchange offers and consent solicitations in the United States in the coming days.

Details

BNP Paribas (+33 1 55 77 78 94, liability.management@bnpparibas.com), Citigroup Global Markets Europe AG (+44 20 7986 8969, liabilitymanagement.europe@citi.com), Morgan Stanley & Co. International plc (+44 20 7677 5040, debt_advisory@morganstanley.com) and MUFG Securities (Europe) NV (+33 1 70 91 42 55, liability.management@murgsecurities.com) are the dealer managers and the solicitation agents.

The tender and information agent and the tabulation agent is D.F. King & Co., Inc. (+44 20 7920 9700, Solvay@dfking.com, https://www.dfkingltd.com/solvay).

Solvay is a Brussels-based chemical manufacturer.

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