Ruric to begin exchange offer for bonds due November 2010 on Oct. 23

By Angela McDaniels

Tacoma, Wash., Oct. 6 - Russian Real Estate Investment Co. AB (Ruric) plans to hold an exchange offer for the bonds due November 2010 issued under its bond loan No. 2 and bond loan No. 3, according to a company news release.

The offer will begin on Oct. 23 and end at 11 a.m. ET on Nov. 5.

Bondholders who exchange can choose to receive bonds or cash.

For each 10,000 Swedish kronor principal amount of existing bonds, holders who chose the bond option will receive:

• 50 new secured bonds with a principal amount of SEK 131 each for a total of SEK 6,550;

• 91 convertible bonds with a principal amount of SEK 44 each for a total of SEK 4,004; and

• A cash payment of SEK 300 for loan No. 2 bonds and SEK 1,050 for loan No. 3 bonds.

Under the cash option, holders will receive SEK 2,925 for each SEK 10,000 principal amount of loan No. 2 bonds and SEK 3,300 for each SEK 10,000 principal amount of loan No. 3 bonds. Each payment includes accrued interest.

The company said it has SEK 35 million available for the cash option. If the amount of bonds tendered under the cash option would result in the company spending more than this amount, the amount of cash paid per note will be reduced on a pro rata basis and holders will instead receive the payment offered under the bond option in an equivalent amount.

By tendering into the offer, bondholders will be consenting to the fact that the interest payment scheduled for Nov. 16 on the existing bonds will not be made and the terms of the bonds will be amended so that they correspond with the terms and conditions of the new bonds, with the exception that the existing bonds will continue to have an unaltered principal amount and will not be secured.

For bond loan No. 2, the amendments regarding postponement of the redemption date and payment of interest require consents from all holders, and the remaining amendments require consents from holders of at least 80% of the outstanding bonds.

For bond loan No. 3, amendments regarding the interest rate, interest amount or postponement of the redemption date require consents from holders of at least three-fourths of the outstanding bonds, and the remaining amendments require consents from holders of at least two-thirds of the bonds.

New bonds terms

The new secured bonds will mature Nov. 16, 2014 and will accrue interest at 10%. At its option, the company can instead pay 13%, with 3% payable in cash and 10% in kind.

The total principal amount of the new secured bonds will be no more than SEK 797,396,345.

The bonds will be callable.

The convertibles will mature Dec. 16, 2014 and have no coupon. They will be convertible into class B shares of the company at a conversion rate of SEK 43.90 per share until Nov. 30, 2014.

The total principal amount of the convertibles will be no more than SEK 332,932,600.

Financing

The offer will be financed through the issue of the new bonds and convertibles together with the company's cash balances.

In addition, the company can issue up to SEK 25 million of new bonds under bond loan No. 5 provided that the proceeds are used to partially finance the cash option or to increase the amount available for the cash option to more than SEK 35 million.

Bonds issued under loan No. 5 would accrue interest at 15% and have a term of three years.

The company can also sell in the open market any new bonds that will not be transferred to those who accept the offer, provided that the proceeds are used to increase the cash amount cap.

The offer is conditioned on the receipt of tenders for 95% of the bonds and the receipt of shareholder approval at an extraordinary general meeting on Nov. 5.

Alecta Pensionsförsäkring, Proventus, Nordea Fonder and the Gadd Group, which together hold 45.2% of the bonds, have indicated a "positive view towards acceptance" of the offer, according to the release.

In addition, Öhman J:or AB, Cancale Förvaltnings AB and Nils Nilsson, holders of 21.7% of the company's outstanding shares and 61.9% of the outstanding votes, plan to vote in favor of the proposal to authorize the board of directors to issue the convertibles and to amend the articles of association at the extraordinary general meeting.

The company said it has been worked to find a solution to its long-term financing in light of the bonds' upcoming interest payment on Nov. 16 and their maturity in November 2010.

Ruric acquires, develops, manages and divests real estate assets in the Russian property market and in St. Petersburg in particular. The company is based in Stockholm.

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