Yuksel drops restructuring plan after shareholders pull support

New York, Dec. 6 – Yuksel Insaat AS said that it will evaluate alternative restructuring proposals after its shareholders decided they will no longer support the currently proposed scheme of arrangement.

The scheme meeting scheduled for Dec. 8 and the sanction hearing set for Dec. 14 have both been canceled, according to a notice from the company.

Yuksel said the shareholders dropped their backing for the restructuring because of the “enormous challenges arising from the prevailing political and economic conditions in Turkey.”

The company is now evaluating alternative proposals “to protect the interests of the note creditors and other secured and unsecured creditors.”

Yuksel announced the scheme of arrangement in May but had to delay launch of the implementation until November because the conditions in Turkey and the Middle East caused discussions with its banks over funding to take longer than expected.

The original terms were negotiated with an ad hoc committee of noteholders owning 53% of Yuksel’s $200 million of senior notes due 2015.

Under the abandoned transaction, noteholders would have received full payment of principal and interest unless the early redemption option is exercised.

The principal amount of the notes would have been reset to $209.5 million plus accrued interest of 9½% from Nov. 10, 2015.

The maturity of the notes was to be extended to Nov. 10, 2019 subject to amortization of $40 million on May 10, 2018, $45 million on Nov. 10, 2018 and $50 million on May 10, 2019.

For the first year, the revised cash coupon of 9½% would have been on a “pay as you can” basis subject to the company and its restricted subsidiaries maintaining a total minimum unrestricted cash balance of $20 million. If not paid in cash, the coupon would have been 2½% cash and 7% paid in kind.

After the first year, the coupon would have been payable in cash except that one semiannual payment may be made as 2½% cash and 7% in kind at the company’s option.

Yuksel would have had an early redemption option that would have allowed it to settle the amount owing in full for $150 million at any time before Nov. 30 and for $150 million plus capitalized interest at 9½% on the $150 million from Dec. 1, 2016 to May 31, 2017.

The restructured notes would have had a mandatory repayment provision requiring 100% of cash proceeds up to $40 million and 70% of cash proceeds in excess of $40 million from the development of certain of the company’s real estate assets in the Çubuklu region of Istanbul, and 100% of the net cash proceeds from the development of the Yuksel Holding AS’ real estate asset in the Çubuklu region of Istanbul to be placed in a separate offshore account. Funds from that account would then have been used to repay the notes at par plus accrued interest on a quarterly basis.

Various covenants were included in the agreement along with requirements for disclosure. Yuksel would also have given a security package to the notes including a pledge over Yuksel Holdings’ shares in Yuksel Insaat and a guarantee of the note obligations by Yuksel Holdings.

Yuksel Insaat is a construction company based in Ankara, Turkey.

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