Frontera Copper completes recapitalization of 10% notes due 2010, 2011

By Susanna Moon

Chicago, June 15 - Frontera Copper Corp. said it completed the restructuring of its 10% senior unsecured notes due June 15, 2010 and its 10% senior unsecured notes due March 15, 2011 under a plan of arrangement filed with the court under the Canada Business Corporations Act, according to a company news release.

The unsecured notes were exchanged for new secured notes.

"By completing the recapitalization, we have made an important step towards addressing the corporation's liquidity issues and bringing the Piedras Verdes Mine to full copper cathode production," chief financial officer Mark Distler said in a press release.

Frontera previously announced that the arrangement received overwhelming approval at the special meeting of noteholders held on June 7.

The arrangement also received final approval of the Ontario Superior Court of Justice on June 10.

Based on the elections received by the corporation, all noteholders will receive new 10% guaranteed secured series 1A notes due Sept. 30, 2013 in exchange for their existing notes. No new guaranteed and secured series 2A notes will be issued.

Plan terms

Specifically, under the plan:

• Each C$1,000 principal amount of unsecured notes was to be exchanged for C$880 in principal amount of new secured notes due Sept. 30, 2013, provided that any noteholder who executed a support agreement with the company or agreed to vote for the plan before an early consent date to be set by order of the court received a total principal amount of C$930 of new secured notes for each C$1,000 principal amount of their unsecured notes;

• The new secured notes were to be issued in two series, including a fixed-rate secured note that accrues interest at a rate of 10% and a variable-rate secured note that accrues interest at a rate between 6% and 14% based on the average price of copper during the prior interest payment period;

• All unsecured notes were to be exchanged for new series 1A secured notes unless a noteholder elected to receive new series 2A secured notes instead;

• The new secured notes are secured by a second-priority security interest on all of the assets and shares of Frontera's key Mexican operating subsidiary, Cobre del Mayo, subordinate only to the first-ranking security interest of Frontera's Mexican commercial lender in those assets and shares.

In addition, CDM will provide a secured guarantee of Frontera's obligations under the new secured notes, subordinate only to CDM's first-ranking obligations to the bank, and an existing intercompany loan between CDM and Frontera will be secured by a third-priority security interest on all of CDM's assets and shares, subordinate to the bank's first-ranking security interest and the noteholders' second-ranking security interest;

• Frontera was entitled to increase its first-priority secured borrowings to $110 million in order to make capital expenditures necessary to bring the Piedras Verdes mine to full production;

• Frontera could apply to extend the listing for each series of the new secured notes on the TSX and continue to be a reporting issuer in Canada. While the listing is maintained, the new secured notes are expected to be RRSP-eligible; and

• The new secured notes are subject to a mandatory repayment schedule under which 25% of the principal amount of the notes must be repaid 21 months after issuance and a further 25% of principal every six months thereafter until the maturity date.

Frontera said all existing defaults will be waived on plan implementation, and all accrued and past due interest on the unsecured notes will be paid on plan implementation at the rate of 10%.

"It is a consensual solution that is fair to our noteholders and that meets Frontera's need to improve its liquidity and access to additional funding in order to bring the Piedras Verdes mine to full production for the benefit of all of Frontera's stakeholders," Distler said.

Frontera is a copper mining company that is based in Phoenix and listed on the Toronto Stock Exchange.

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