Titan lowers minimum tender condition in exchange offer for 8½% notes

By Jennifer Chiou

New York, July 14 - Titan Petrochemicals Group Ltd. once again amended the terms of the exchange offer and consent solicitation for its $315.36 million outstanding principal amount of 8½% guaranteed senior notes due 2012, this time reducing the minimum tender condition to 63.44% from 70%.

Unchanged as of 5 p.m. ET on July 6, investors have tendered $200,087,000 principal amount, or 63.45%, of the existing notes. This compares with $181,592,000 principal amount, or 57.58%, of the notes on June 29.

Titan is also soliciting consents from the noteholders to proposed amendments that would eliminate substantially all of the restrictive covenants, all of the reporting requirements and some events of default in the indenture governing the notes.

The early tender date coincides with the deadline for the exchange offer, which is 5 p.m. ET on July 20. Previously, the early tender time was 5 p.m. ET on June 21, and the exchange offer was to expire at 5 p.m. ET on July 6.

As previously reported, the company began an exchange offer for the notes in December and terminated it in April after failing to meet the minimum tender condition. Soon after, it announced plans for a new exchange offer with a lower minimum tender condition, but this was terminated in May.

In the latest offer, which was announced June 8, the company is offering new 0% convertible notes due 2015, new 8½% pay-in-kind notes due 2015 and cash in exchange for the 8½% notes.

For each $1,000 principal amount of notes tendered by the deadline, holders will receive $376 principal amount of convertibles, $68 principal amount of PIK notes and $206 in cash.

New notes terms

Up to $118,575,360 of the convertibles and up to $21,444,480 of the PIK notes will be issued in the offer. The cash amount to be paid will be $54.7 million to $65 million.

The company said the redemption amount at maturity will be $570 for each convertible and $103 for each PIK note. In each case, this is 151.621% of the principal amount at issuance and represents a yield of 8½% compounded semiannually.

The convertibles will have a conversion rate of 10,915 shares per $1,000 principal amount, which is equal to a conversion price of approximately $0.0916 per share and represents a premium of about 16.38%.

If all of the notes were converted, the resulting shares would represent 16.45% of the company's issued share capital.

Titan will be able to force conversion of the notes if the dollar equivalent of the closing share price of its stock is at least 130% of the conversion price for at least 30 consecutive trading days.

The convertibles will be callable at the higher of the amount that will result in a yield of 8½% and the net present value of the amount payable on maturity of the convertibles redeemed.

The PIK notes will be callable at par plus a premium.

The company has received approval in principle from the Singapore Exchange Securities Trading Ltd. to list both series of notes.

If the tenders for the 63.45% of notes remain unchanged, the company said that upon acceptance, it will pay cash of HK$319.5 million while new notes totaling HK$688.5 million will be issued.

Offer conditions

The offer is now conditioned on the receipt of at least 63.44% of the outstanding principal amount of notes and the receipt of consents from the holders of at least a majority of the principal amount of outstanding notes not owned by Titan or its affiliates.

The company plans to use proceeds from a HK$370 million share subscription agreement with Moral Base Investment Ltd. to fund the exchange offer.

As already reported, the obligation of Moral Base to purchase the shares is conditioned on, among other things, 70% of the 8½% notes being tendered. Moral Base also has the right to terminate the share subscription agreement if the conditions to the agreement's completion have not been satisfied by Aug. 15, extended from July 15.

The company warned that not receiving the expected funding from the equity placing would have an adverse impact on its ability to continue as a going concern.

Goldman Sachs (Asia) LLC is the global coordinator, lead arranger and co-dealer manager, and ING Bank NV, Singapore Branch is the co-arranger and co-dealer manager of this offer.

Titan is a Hong Kong-based trader of petrochemicals and oil products.

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