Paladin offers Plan B to restructure debt, including exchange issue

By Susanna Moon

Chicago, May 16 – Paladin Energy Ltd. said that holders of 57.6% of its 2017 convertible bonds and 55% of its 2020 convertible bonds agreed to support the company’s alternative restructuring proposal.

The balance of any existing convertible bonds will be exchanged into new 2022 secured convertible bonds, according to a company announcement.

“The alternative restructure proposal allows Paladin to materially reduce its debt obligations, extend the maturity of any remaining debt and preserve the long-term supply contract dated Aug. 8, 2012 with Electricite de France SA,” the company said in the release.

Paladin recorded total debt of about $665 million including $20 million drawn under its revolving credit facility and a $273 million prepayment from EDF as of March 31.

The new secured bonds will be repayable in 2022, which pushes out the maturity of the company's existing convertibles, which are all due by 2020.

In the exchange offer, for each $1,000 principal amount bondholders will receive

• Cash payment to reduce the outstanding principal amount;

• Balance of principal plus accrued interest for new secured bonds; and

• 828 equity warrants, with a strike price of $0.0125 (pre-consolidation).

The amount of any cash payment will depend on the independent valuation of Paladin's 75% interest in Langer Heinrich Mine, according to the release.

The alternative restructure proposal is contingent on proceeds for the 75% interest in the mine of at least $500 million, which represents a discount to the sale price previously agreed with CNNC Overseas Uranium Holdings Ltd. for the sale of a 24% interest in the mine in July 2016.

The new secured bonds will have a coupon rate of 7½% and a maturity date of five years from closing.

The bonds will have second-ranking security over some assets and a first-ranking security over other assets.

The bonds will be callable at par plus accrued interest.

Paladin will also take up quarterly mandatory purchases of the bonds for rolling cash balances above an agreed threshold.

The bonds will also restrict the payment of dividends to shareholders until they are repaid.

Each equity warrant will confer on the holder the right to receive one fully paid ordinary Paladin share. The exercise price will be $0.0125 pre-consolidation and the equity warrants will expire five years from the closing date.

The equity warrants have been provided to the holders of the existing convertible bonds as an incentive for them to vote in favor of the alternative restructure proposal if they are substantially repaid from proceeds from the sale of Paladin's 75% interest in the mine.

“Whilst we're disappointed in the actions of CNNC given all the support our Plan A restructure proposal got, we are pleased that our bondholders remain supportive of the company and have been able to agree an alternative restructuring proposal in the event that CNNC acquires Paladin's interest in LHM,” Alex Molyneux, chief executive officer, said in the press release.

“Whilst there are still a significant number of conditions precedent to complete the alternative restructure proposal, we believe it offers us a clear path to address the company’s balance sheet position and maintain an asset portfolio that can capture the substantial potential upside from a recovery in the uranium market.”

As announced Jan. 9, the original restructuring proposal included exchanging $362 million of convertibles, comprising all outstanding 2017 convertibles and 2020 convertibles, into

• $115 million of new secured bonds due 2022, with a 7% cash coupon;

• $102 million of new 2024 convertible bonds, with a zero coupon and conversion price of $0.0512 per share;

• $145 million, or about 40%, of Paladin shares to be issued at A$0.05/share; and

• Any accrued interest to be exchanged 75%:25% into the new secured bonds and the new 2024 convertible bonds respectively.

In order to implement the proposal, the company must secure the support of bondholders representing 75% of each of the 2017 and the 2020 convertibles, according to a previous announcement.

Conditions also include the following

• Electricite de France must consent to amendments to the long term off-take agreement allowing early deliveries against the prepayment amount paid by EDF in 2012 and security sharing arrangements with the new secured bonds and the new 2024 convertibles;

• Formal approval must be granted by holders of the existing convertibles;

• Shareholders must give approval;

• Paladin must conduct an equity raising of at least $75 million;

• Paladin will continue to hold 75% of Langer Heinrich Mine;

• There must be no superior proposal;

• All necessary regulatory approvals must be granted, including from Australia's Foreign Investment Review Board; and

• Consent must be given by existing secured parties to grant subsequent ranking security in favor of EDF, the new secured bonds and the new 2024 convertible bonds.

Paladin is a Perth, Australia-based uranium mining company.

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