OPTI noteholders agree to restructuring terms, $375 million investment

By Caroline Salls

Pittsburgh, July 13 - OPTI Canada Inc. filed for Companies' Creditors Arrangement Act protection after reaching an agreement with a committee of holders of its 7 7/8% senior secured notes due 2014 and 8¼% senior secured notes due 2014 on a restructuring of the company's balance sheet and $375 million equity investment, according to a news release.

The CCAA filing was made in the Court of Queen's Bench of Alberta.

The company said the transactions will significantly improve its total leverage and liquidity.

OPTI Canada said holders of more than 50% of the secured notes have executed support agreements under which they have agreed to vote for the restructuring plan.

"The restructuring and new equity commitment we have negotiated is indicative of the support of OPTI's noteholders, who recognize the long term value in the company's asset base," president and chief executive officer Chris Slubicki said in the release.

"The recapitalization of our balance sheet will provide us with cash resources to continue to advance operations at Long Lake, as well as to begin development at Kinosis, with our operating partner, Nexen."

Restructuring terms

Specifically, under the restructuring plan, valued at $1.725 billion:

• All secured notes will be converted into new common shares of OPTI. The new common share investment will be offered to all secured noteholders via a rights offering;

• Some of the supporting noteholders have committed to backstop the rights offering;

• As a condition of the restructuring, the company's 9% first-lien senior secured notes due 2012 and 9¾% first-lien senior secured notes due 2013 are to be refinanced before closing;

• OPTI's trade payables and employee obligations will remain unaffected by the restructuring and will be paid or satisfied in the ordinary course by the company;

• A total of 100 million new common shares will be issued in consideration for the exchange of the notes and for the $375 million new investment;

• The exchange shares will be allocated to all noteholders based on their share of the noteholders' claim amount, while 95.2381% of the investment shares will be allocated to electing noteholders who participate in the new investment and the balance to the initial backstop parties;

• Noteholders can participate in up to 70% of the new investment, and the remaining 30% will be subscribed for by the backstop parties;

• OPTI will pay a $10 million fee to the initial backstop parties; and

• Holders of OPTI's existing common shares will be issued seven-year warrants to acquire new common shares, and all of OPTI's existing common shares will be cancelled.

The warrants will give holders the right to purchase a total of 20% of the company's post-restructuring new common shares.

OPTI said the strike price of the warrants has been set at a price where the new common shares issued to noteholders would have a value that is roughly equal to the total face value of the secured notes plus interest accrued to Aug. 31 and the amount of the new equity investment.

Specifically, OPTI will issue shareholder warrants for the purchase of 25.54 million new common shares with a strike price of $22.27 per new common share.

OPTI said it plans to set a date within the next month for a noteholder meeting to occur in late September.

The company said it aims to complete the restructuring by Dec. 1.

Ernst & Young Inc. is OPTI's court-appointed monitor. The company is being advised by Lazard Freres & Co. LLC and Macleod Dixon LLP in connection with the restructuring.

OPTI Canada is a Calgary, Alta.-based company focused on developing oil sands projects.

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