H.E.A.T. Mezzanine unable to repay notes in full on redemption date

By Caroline Salls

Pittsburgh, May 18 - H.E.A.T. Mezzanine SA's noteholders will likely not be repaid in full on the Aug. 10 redemption date, according to a notice to noteholders.

A long coupon payment is also due on the Aug. 10 redemption date.

In light of the number of portfolio companies that have either defaulted on their respective financing agreements or have restructured their debts, H.E.A.T. believes it is likely that there will be a shortfall on the scheduled redemption date.

Under the terms and conditions of the notes, repayments will be made in accordance with the priority of payments under which any losses arising as a result of a shortfall will be absorbed first by holders of junior notes, then the holders of class B1 notes and class B2 notes and lastly by the holders of class A1 notes.

The highest ranking class of notes that remains outstanding on the redemption date after repayment of the more senior classes of notes will become the controlling class.

As a result of the expected shortfall, the company said it has invited noteholders to share their views on how to best proceed with recovering any remaining outstanding sums from the portfolio companies after the redemption date.

Specifically, H.E.A.T. said the noteholders should consider whether a work-out manager or an additional recovery manager should be appointed and/or whether the company should take steps to maximize recoveries from the portfolio companies.

According to the notice, a specialist consultancy established to assist the company in negotiations with the portfolio companies that are in financial difficulties has asked to be appointed as work-out manager.

H.E.A.T. is a Luxembourg-based securitization vehicle.

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