Takefuji begins exchange offer for convertibles with June put option

By Angela McDaniels

Tacoma, Wash., Nov. 16 - Takefuji Corp. has begun an exchange offer for its ¥70 billion of 1.5% convertible bonds due 2018, which are putable in June.

No more than ¥40 billion principal amount of convertibles will be purchased in the offer, according to a company news release.

Holders can elect to receive cash or a combination of cash and new 10% euro-yen bonds due April 11, 2011. The company noted that holders who are residents of Japan will only be allocated cash.

The amount of cash to be paid will be determined through a modified auction process and will be at least 50% of par for holders who choose the cash payment and at least 25% of par for holders who choose the combination payment.

The company said holders who elect to receive cash and bonds will receive a total amount that is similar to par.

No more than ¥18 billion in cash will be paid in the offer, and the maximum principal amount of new notes to be issued is ¥30 billion.

The company will repay 10% of the new bonds each month from July 2010 through maturity.

The expiration date of the exchange offer is Dec. 2, and the settlement date is expected to be Dec. 14.

The Tokyo-based consumer finance company said that amid poor industry conditions, its liquidity position has been adversely affected by downgrades by Moody's Investors Service and Standard & Poor's, which triggered an early repayment covenant included in some consumer loan receivables trust agreements.

In light of these circumstances, Takefuji said it is "critical" that it reduce the outstanding principal amount of the convertibles.

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