Sherritt plans exchange for C$300 million 6% convertibles

New York, Oct. 28 - Sherritt International Corp. said it is offering to exchange up to C$300 million of its 6% convertible unsecured subordinated debentures due Dec. 15, 2006 for new convertibles with a higher coupon, lower conversion price and a longer maturity.

The Toronto natural resource company currently has C$600 million of the 6% convertibles outstanding.

"With about $300 million cash and liquid securities on hand, profitable operations generating cash flow in excess of our capital requirements and favorable growth prospects, the exchange offer better aligns the maturity of our debentures with our long-term growth strategy," said Ian W. Delaney, chairman of Sherritt, in a news release. "A successful offer will allow existing cash resources and projected cash flow to be used to pursue a number of business opportunities designed to create long-term incremental value for all our stakeholders."

The new convertibles will carry a 7% coupon, mature on Dec. 15, 2013 and be convertible at a price of C$7.00 per restricted voting share. The existing securities convert at C$8.775 per restricted voting share.

Sherritt said that apart from the interest rate, the conversion price, the maturity and redemption and repurchase terms, the new convertibles will be "substantially similar" to the existing ones.

Sherritt said it believes the exchange will be attractive because:

* The interests of the holders of the new convertibles will be more closely aligned with equityholders' interests. The 6% debentures effectively trade as non-convertible debt. The 7% debentures will provide holders with an opportunity to benefit more directly from an increase in value of the restricted voting shares;

* The new convertibles have a higher interest rate;

* The new convertibles have a lower conversion price;

* The new convertibles have an extended term, providing a greater ability to benefit from any appreciation of the restricted voting shares;

* The new convertibles are being offered at par, representing a premium to historic trading values of the 6% debentures; and

* The new convertibles will not be redeemable by Sherritt for at least three years, giving holders an attractive yield for an extended period on a protected basis.

The exchange runs through Dec. 3.

If less then C$150 million of the existing convertibles are tendered, Sherritt will have the right to withdraw the offer.

Dealer managers are National Bank Financial Inc., BMO Nesbitt Burns Inc., Griffiths McBurney & Partners, Paradigm Capital Inc., Peters & Co. Ltd. and Salman Partners Inc.

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