Talvivaara, unit administrator sends restructuring proposals to court

By Caroline Salls

Pittsburgh, Sept. 30 – The corporate reorganization administrator for Talvivaara Mining Co. plc and operating subsidiary Talvivaara Sotkamo Ltd. filed the draft restructuring programs of both companies with the District Court of Espoo, according to a news release.

The administrator said the business operations of both Talvivaara and Talvivaara Sotkamo have proven to be viable during the corporate reorganization proceedings, and it is possible to make the mining operations in Sotkamo profitable. However, the continuation of the business operations will require that new financing be obtained.

Under the terms of the draft restructuring programs, all of Talvivaara Sotkamo’s business operations will be sold to a new company established by Talvivaara. In connection with the sale, the existing product streaming and product sale and purchase agreements in Talvivaara Sotkamo’s name would be transferred on terms to be separately negotiated. The purchase price would be used in full to pay Talvivaara Sotkamo’s restructuring debts.

The administrator said the dilution of existing shareholders resulting from the sale will depend on the amount with which existing shareholders are willing to participate in a new issuance.

A one-time payment would be made to the creditors of Talvivaara Sotkamo with the possibility of supplementary payments, while a customary eight-year restructuring program can in the view of the administrator be drafted for Talvivaara, provided that financing for the duration of the implementation of the restructuring program can be secured.

No payments will be made to creditors of Talvivaara during the first two years. Thus, the payments to creditors will take place during 2017 to 2022 so that the creditors will be paid 10% of the capital cut in accordance with the program during each of 2017 and 2018 and 20% thereafter.

The secured debts and leasing debts of Talvivaara would be paid off according to the same schedule as the unsecured debts.

Talvivaara’s cash flow during the program will consist of fees for providing administrative, financing and other group services, rental income, repayment of the amount borrowed to Talvivaara Sotkamo during the reorganization proceedings and the repayments on Talvivaara Sotkamo’s long-term loans through the sale process.

The administrator proposed that Talvivaara Sotkamo sign an agreement implementing or facilitating the sale process by Dec. 1. Otherwise, the administrator can petition the district court to interrupt the restructuring proceedings.

Debt payment estimates

According to the release, the administrator estimates that €21.9 million of €53 million of secured debt will be payable upon execution of the sale process.

The secured creditors and the parties to the sale and purchase of Talvivaara Sotkamo’s business must agree separately on how the remaining balance of the secured financing debt is to be paid. This arrangement will require the consent of all of the secured creditors.

In addition, the administrator proposed that the capital of €956 million in unsecured debts of Talvivaara Sotkamo and €478 million in unsecured debt of Talvivaara be cut by 99% for Talvivaara Sotkamo and by 97% for Talvivaara.

No payments will be made on debts with lowest priority of either of the companies. The convertible bonds and bonds issued by the company shall be treated as unsecured debt.

Talvivaara would be entitled to a payment of its €527.8 million unsecured receivable from Talvivaara Sotkamo in accordance with Talvivaara Sotkamo’s restructuring program. Talvivaara has pledged €300 million of this receivable as security for its own and its subsidiary’s debts.

Talvivaara said payments of the receivable exceeding the pledge will remain for the benefit of Talvivaara and strengthen the company’s cash reserves.

The holders of Talvivaara Sotkamo unsecured debt will be entitled to receive supplementary payments upon NewCo having to pay additional purchase price to Talvivaara Sotkamo or upon Talvivaara Sotkamo being entitled to supplementary payments on the basis of any other undertaking.

Earnings results

In a separate news release, Talvivaara reported a €4.2 million operating loss for the second quarter on net sales of €39.2 million.

Those figures compared to a €23.9 million operating loss for the second quarter of 2013 on €13 million in net sales.

The company posted an €11.2 million operating loss for the first half of 2014 on €68.2 million in net sales, improving from a €43.8 million operating loss for the first six months of last year on €40.6 million in net sales.

“Our second quarter 2014 was another period of steady operational performance with production volumes exceeding those achieved in any quarter since Q3 2012,” chief executive officer Pekka Pera said in the earnings release.

“Furthermore, our January-June production of 6,257t of nickel was already 72% of the amount we produced in all of 2013, which further confirms the good leaching performance of our primary heaps 1 and 4 as well the coming of age of our metals recovery plant that has run at above 90% availabilities throughout the year to date.”

Helsinki-based Talvivaara Mining is a base metals producer with its primary focus on nickel and zinc.

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