A.M. Castle meets minimum consent condition, extends early deadline

By Susanna Moon

Chicago, Feb. 1 – A.M. Castle & Co. said investors had tendered consents for $122,193,000 principal amount, or 66.96%, of its $182,500,000 outstanding 12¾% senior secured notes due 2016.

As a result, the minimum participation condition in the exchange offer has been satisfied as of 5 p.m. ET on Jan. 29, the original early tender date and withdrawal deadline, according to a company news release.

In addition, holders may now tender their notes for exchange until 5 p.m. ET on Feb. 2, extended from Jan. 29, in order to receive the consent payment, the release noted.

In exchange for tendered notes, the company is offering new 12¾% senior secured notes due 2018.

The exchange offer will continue until 11:59 p.m. ET on Feb. 12. Tendered notes may no longer be withdrawn.

The company obtained the needed 66 2/3% consents and expects to execute a supplemental indenture, which will become operative when the early tendered notes are settled on Feb. 8.

The company also received tenders for another $27.5 million principal amount of notes owned by an affiliate of the company, which were excluded from the results, bringing the total tally so far to 70.42% of the outstanding notes.

The company said on Jan. 15 that it is offering to exchange the notes for new 12¾% senior secured notes due 2018 as part of an overall plan to refinance its public debt.

As a part of the refinancing plan, the company had entered in separate transaction support agreements with holders of more than 57% of the aggregate principal amount of the existing 12¾% notes due 2016 and 78% of the aggregate principal amount of its 7% convertible senior notes due 2017 to refinance its public debt.

On Feb. 1, the company added that it now has additional transaction support agreements from holders of $142.51 million principal amount of its existing notes and $51.6 million principal amount, or 89.74%, of its 7% convertibles.

The company said it also agreed to amend the support agreements to add a covenant to the new notes that prohibits the company, following the exchange offer and the issue of new notes, from repaying or prepaying any remaining existing notes using more than $10 million of borrowings under its senior credit facility or any debt that is secured by a lien that ranks higher in priority than those of the new notes.

Under the support agreements announced Jan. 15, the company also had agreed to an exchange offer of new 5.25% senior secured convertible notes due 2019 for the existing 7% convertible notes by June 30.

The company will not receive any cash proceeds in connection with the refinancing plan.

“To ensure the fullest participation in the exchange offer, we have decided to extend the deadline for noteholders to receive the consent payment in connection with the exchange offer to Feb. 2,” the company’s president and chief executive officer, Steve Scheinkman, said in the news release.

“We believe completion of the exchange offer will help us build on the momentum our operational restructuring progress has produced to date.”

New notes, other details

Holders who tender and deliver their consents by the early tender date will receive an additional consent payment of $20.00 in cash per $1,000 principal amount of notes tendered.

The new 2018 notes being offered in exchange for the existing 2016 notes have substantially the same terms as the existing notes, except for, among other things, the following:

• The new notes effectively extend the maturity date of the old notes to Dec. 15, 2018, unless Castle is unable to both (a) complete the exchange of a portion of its existing convertible notes on or prior to June 30 and (b) redeem, on one or more occasions, an aggregate of at least $27.5 million principal amount of the new 2018 notes on or prior to Oct. 31, 2016, using available cash or proceeds from asset sales, in which case the maturity date of the new notes will be Sept. 14, 2017;

• The new notes will provide that, whether or not the special redemption condition is satisfied, the company will have an obligation to effect special redemptions using designated asset sale proceeds or other permissible funds until the aggregate amount of special redemptions equals $40 million;

• The new notes will contain modifications to the asset sale covenant. The company is not to use any net proceeds from asset sales outside the ordinary course of business to redeem, repay or prepay the existing 2016 notes or the existing 7% convertibles;

• Granting of a third-priority lien on the collateral securing the new notes for the benefit of the new convertibles will be a permitted lien under the indenture; and

• The new notes will include an event of default if Castle does not complete the private convertible note exchanges by June 30.

In conjunction with the Rule 144A/Regulation S exchange offer, the company is soliciting consents to proposed amendments to the existing 2016 notes that would eliminate substantially all restrictive covenants and some events of default and release all of the collateral securing the existing notes.

The company said it will use cash on hand to fund the consent payment.

Under the support agreements, holders of $120.2 million of the existing notes had agreed to tender their notes in the offer. Of that amount, $27.5 million belongs to holders affiliated with the company who are therefore ineligible to participate in the consent solicitation. Because ineligible existing notes are not considered outstanding for the purpose of approving the consent solicitation, the outstanding amount of 2016 notes is in effect $182.5 million, as previously noted.

For a copy of the eligibility letter, call D.F. King & Co., Inc. at 800 591-8269 or 212 269-5550 or email cas@dfking.com.

Convertibles exchange offers

As announced, the support agreements cover private exchanges in which the company has agreed to issue new 5.25% convertibles for the existing 7% convertible notes and a registered exchange offer in which the company will offer to issue new 5.25% convertibles to all holders of outstanding 7% convertibles other than the supporting holders.

The private exchanges and registered exchange offer will be carried out on substantially identical terms.

For each $1,000 principal amount of existing convertibles tendered, an exchanging holder will receive $700 principal amount of new notes, plus accrued interest.

The new convertible notes will mature on Dec. 31, 2019 and will bear interest at a rate of 5.25% per year.

The new notes will initially be convertible into common stock at a conversion price of $2.25 per share.

“We have further plans to meaningfully reduce our debt through the continued reduction of inventory and asset sales, which would include the sale of our subsidiary, Total Plastics, Inc.,” Scheinkman said in a previous news release.

“In total, including the exchange offer planned for our convertible notes and sales of underperforming and non-core assets, we are targeting a reduction of our total outstanding indebtedness of up to $100 million, which when coupled with our operational restructuring, we believe will improve current operating performance and position the company for future growth.”

A.M. Castle is a distributor of specialty metal and plastic products, value-added services and supply-chain services based in Oak Brook, Ill.

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