Fortress to now extend 7% convertibles to 2021, up rate to 9.75%

By Susanna Moon

Chicago, Oct. 1 – Fortress Global Enterprises Inc. said it has enhanced the terms to the proposed amendments to its 7% convertible unsecured subordinated debentures due Dec. 31, 2019 to be considered at the meeting set for Monday.

Based on holder feedback, the company is now proposing to extend the maturity of the debentures to Dec. 31, 2021 and to raise the coupon to 9.75%, effective Jan. 1, 2019, according to an announcement.

The company had said on Aug. 28 that it sought to extend the maturity by three years to Dec. 31, 2022 and to increase the coupon to 8%.

Fortress also will incorporate the following restrictive covenants:

• Restrictions on declaring or paying any dividend or distribution on the company's common shares;

• Restrictions on the incurrence of debt senior to the debentures;

• Restrictions on any asset sales by the company or any of its subsidiaries unless 75% of the net cash proceeds exceeding $8.5 million derived from the sale and not otherwise reinvested in the business of the company are first applied toward the purchase or redemption of the debentures; and

• Restricting the payment of cash consent amount and soliciting dealer fees in connection with any proposed amendments to the debentures.

Also, the consent fee of 2% has been extended to holders who give their consents by the beginning of the meeting.

Originally, only holders who consented to the amendments by the early deadline of 8 p.m. ET on Sept. 24 would have received 2% in cash.

“Over the last several weeks we have had discussions with debentureholders, and based on their feedback we have decided to provide enhanced terms and have received strong support for the revised amendments,” Chadwick Wasilenkoff, chairman, chief executive officer and president of Fortress Global, said in the press release.

“We continue to believe that the proposed debenture amendments would provide Fortress Global with greater financial flexibility and enable us to focus our resources, without disruption, on key strategic, business and operational targets, to the benefit of all company stakeholders.”

Holders of about 31% of the debentures have signed support agreements for the revised terms, the release noted.

For the amendments to be approved, holders of at least 66 2/3% of the principal amount of the debentures represented by vote must vote for the amendments.

The company previously said a special committee of its board of directors believes holders of the debentures would benefit from having a longer period of time during which they will receive a favorable interest rate, as well as from the increase in the coupon.

The board of directors unanimously recommends holders of the debentures vote in favor of the amendments.

Acumen Capital Finance Partners Ltd. provided the special committee of the board with an independent opinion that the amendments are fair, from a financial point of view, to the holders, according an original release by Fortress.

The company noted it has a track record of making interest payments on the debentures and repayment of principal when due to holders of previous issues, including the repayment in full of the C$40.25 million of 6.5% convertible unsecured subordinated debentures, which matured on Dec. 31, 2016, and the C$25 million of unsecured convertible debenture, which was repaid early in February 2017.

Raymond James Ltd. is the dealer manager for the consent solicitation and has acted as exclusive financial adviser to the company regarding the amendments.

Laurel Hill Advisory Group (877 452-7184, 416 304-0211 or assistance@laurelhill.com) is the information and proxy solicitation agent.

Fortress operates a dissolving pulp business at the Fortress Specialty Cellulose Mill and also operates in the renewable energy generation sector through the Fortress Specialty Cellulose Mill's cogeneration facility. The company plans to establish a demonstration plant for the future production of xylitol and other bioproducts. It is based in North Vancouver, B.C.

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