CEVA extends consent payment to all notes tendered in exchange offers

By Susanna Moon

Chicago, April 26 - CEVA Group plc said it extended the consent payment date in the private exchange offers and consent solicitations for the company's debt securities in connection with its financial recapitalization and its solicitation of votes for acceptance of a pre-packaged plan of reorganization.

Now holders may receive the consent fee regardless of when they tender their notes under the offer, according to a company press release. Originally, only those who tendered their notes by the consent deadline would have received the early tender payment.

The exchange offer is being made to the holders of the company's 12¾% senior notes due 2020, 12% second-priority senior secured notes due 2014, $113 million senior bridge loan and 11½% junior priority secured notes due 2018.

The consent fee is 0.05 CEVA Holdings shares per $1,000 principal amount of 11½% notes, 12¾% notes or bridge loan and 0.06405 shares per €1,000 principal amount of 12% second-priority senior secured notes due 2014, as previously noted.

The exchange offer will end at midnight ET on April 30. The offer began April 4.

As of 5 p.m. ET on April 22, the original consent date, holders had tendered about $531 million of the 12¾% notes, $113 million senior bridge loan and $664 million of the 11½% notes.

The company previously noted that it received the needed majority of consents to amend the notes and planned to enter into a supplemental indenture, which will become effective when the offers close.

In conjunction with the exchange offers, CEVA is soliciting consents from holders of a majority of the 11½% notes and the 12¾% notes to

• Eliminate substantially all of the restrictive covenants and some events of default and related provisions;

• Allow CEVA and its affiliates who are holders of 11½% notes and 12¾% notes to vote on any consents, amendments or waivers to the indentures; and

• Release of all of the liens on the collateral securing the 11½% notes.

The company previously said that, if the exchange offers are completed, holders who tendered by 5 p.m. ET on April 16 will receive a consent fee.

Offer background

As previously reported, CEVA did not make the interest payments due on April 1 on the 11½% notes and 12¾% notes. The payment is subject to a 30-day cure period. The company said it will try to implement the recapitalization during that cure period.

The company expects the recapitalization to reduce its consolidated net debt by more than €1.2 billion and its annual cash interest expense by more than €135 million, or roughly 50%.

The company entered into a restructuring support agreement with parties representing about 83% of the 12¾% notes, 12% notes and bridge loan and 69% of the 11½% notes.

Under the support agreement, three parties have committed to investing €205 million, including investment funds affiliated with Apollo Global Management, LLC that are creditors of CEVA, funds advised by Capital Research and Management Co. that are creditors of CEVA and the company's largest institutional investor.

CEVA said these three parties will become its largest shareholders under the recapitalization.

Exchange offer

In exchange for the 11½% notes, the company is offering new series A-2 convertible preferred equity interests and new common equity interest. Both will be issued by CEVA Holdings LLC, which will be the ultimate parent company of CEVA once the recapitalization is completed.

The company is offering CEVA Holdings common shares in exchange for the remaining debt.

Holders who exchange will receive

• 0.4855082 convertible preferreds and 0.1742813 shares for each $1,000 principal amount of 11½% notes;

• 0.3644632 shares for each $1,000 principal amount of 12¾% notes;

• 0.4394916 shares for each €1,000 principal amount of 12% notes; and

• 0.3429161 shares for each $1,000 principal amount of bridge loan.

In addition, the holders of some PIK debt instruments issued by CEVA's current parent company, CIL Ltd. (formerly known as CEVA Investments Ltd.), will be able to exchange those instruments for CEVA Holdings shares.

Rights offering

CEVA Holdings is also offering the holders the opportunity to participate in an equity rights offering for new series A-1 convertible preferred equity interests to be issued by CEVA Holdings.

Holders will receive subscription rights to subscribe for a number of series A-1 preferreds, on a pro rata basis, in direct correlation to their entitlement to receive CEVA Holdings shares in the exchange offers after taking into account conversion of the convertible preferreds.

Apollo and Capital Research have agreed to backstop a portion of the rights offering.

Additionally, the company's largest institutional investor has committed to a debt financing with the company.

The exchange offers are conditioned on, among other things, the receipt of tenders for 98% of each series of debt and the completion of the rights offering.

In addition, in order to consummate the exchange offers, CEVA is seeking some concessions from certain other creditors, including its asset based lenders and secured credit facility lenders.

On April 16 CEVA said it obtained waivers and amendments under its senior secured credit facilities as well as its U.S. asset-backed loan facility.

The waivers were secured in connection with the company's financial recapitalization plan, which would reduce substantially CEVA's overall debt and interest costs, increase liquidity and strengthen its capital structure, according to a previous press release.

Alternative plan

CEVA is also soliciting votes for acceptance of a U.S. pre-packaged plan of reorganization and irrevocable undertakings to vote in favor of a U.K. scheme of arrangement, each of which requires a lower voting threshold than the exchange offers.

CEVA said it plans to begin these alternative court proceedings if the exchange offer conditions are not satisfied, including obtaining concessions from its bank lenders.

According to the company, the terms of the plan of reorganization and scheme of arrangement would be less favorable to the noteholders and bridge loan holders than in the exchange offers but would continue to provide for payment in full of all claims of the company's vendors and other unsecured creditors.

The deadline for casting votes on the U.S. pre-packaged plan of reorganization is the same as the exchange offer expiration, midnight ET on April 30.

The exchange offers are being made in the United States only to holders who are both qualified institutional buyers or accredited investors and U.S. persons and outside the United States only to persons other than U.S. persons who are non-U.S. qualified offerees.

The new securities being offered in the exchange offers have not been registered under the U.S. Securities Act.

The exchange agent is Garden City Group (855 454-1736).

CEVA Group is a London-based supply chain company.

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