Tervita sets meetings for noteholders to vote on plan of arrangement

By Wendy Van Sickle

Columbus, Ohio, Oct. 17 – Tervita Corp. said the Alberta Court of Queen's Bench issued an interim order authorizing, among other things, convening meetings of holders of its 9¾% senior unsecured notes due November 2019 and its 10 7/8% senior unsecured notes due February 2018, its 11 7/8% senior subordinated notes due November 2018, according to a Monday press release.

The court also approved a meeting of holders of Red Sky Acquisition Corp.'s common shares. In each case, the purpose of the meeting is for holders to consider and vote upon a corporate plan of arrangement under the Canada Business Corporation Act to implement the previously proposed recapitalization transaction.

The meetings are scheduled to be held on Nov. 30 in Calgary, Alta., at noon ET for the unsecured notes and12:30 p.m. ET for the subordinated notes. The shareholders’ meeting will follow.

To be approved, the plan of arrangement requires the affirmative vote of at least 66 2/3% of the votes cast at each of the unsecured noteholders' meeting and the subordinated noteholders' meeting and 53.6% of the votes at the Red Sky shareholders' meeting.

Tervita said it has entered into support agreements with about 74% of the unsecured noteholders, 98% of the subordinated noteholders and 69% of the Red Sky shareholders.

If the plan of arrangement is approved by the requisite majorities at the meetings, the company will attend a hearing before the court, which is currently set for Dec. 6. If court approval is granted on that date and other conditions to completion of the recapitalization are satisfied or waived, the company said it expects the transaction will be completed on or about the end of December 2016.

Recapitalization terms

As previously reported, the key elements of the recapitalization transaction include:

The creation of a new class of common shares and a new class of preferred shares of Tervita;

The issuance of 48.36 million of the new preferred shares in consideration for an investment of up to C$372 million, the value of which will be adjusted to ensure that Tervita has cash equal to no less than C$75 million immediately after the implementation of the recapitalization;

The issuance of 47.28 million of the new preferred shares in consideration for the exchange of the secured debt held by the transaction sponsors;

Secured debt held by other parties will be repaid in full;

Unsecured noteholders will receive 80% of the new common shares of Tervita;

Unsecured noteholders that execute the support agreement by Oct. 14 will also receive 20% of the new common shares, as additional consideration;

Subordinated noteholders will receive a C$20 million payment. Subordinated noteholders that execute a support agreement by Oct. 14 will receive a share of an additional C$5 million;

Total debt will be reduced by roughly C$2 billion and annual cash interest expense reduced by about C$200 million;

All existing Tervita equity will be exchanged for 20% of the net proceeds from litigation after specified deductions; and

The company will issue $475 million in new debt and reinstate or replace the revolver.

Tervita and the plan sponsors entered into a backstop commitment letter related to the funding of the new share offering.

Tervita’s legal advisers in connection with the recapitalization are Osler, Hoskin & Harcourt LLP and Fasken Martineau DuMoulin LLP and its financial adviser is Barclays Capital Inc.

Tervita is a Calgary, Alta.-based environmental management company for the oil and gas industry.

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