Mexico’s Mega offers to swap 8¼% notes due 2025 for 12% notes due 2028

By Marisa Wong

Los Angeles, Oct. 16 – Operadora de Servicios Mega, SA de CV, Sofom, ER began an offer on Friday to exchange any and all of its $352,158,000 outstanding 8¼% senior notes due 2025 (Cusip: 68373NAA3) for its newly issued 12% senior notes due 2028 and a solicitation of consents from holders of the 2025 notes to amend the indenture governing the existing notes.

The company is offering an early exchange consideration of $1,000 for each $1,000 principal amount of existing notes tendered for exchange on or prior to the early exchange date. The early exchange consideration includes an early exchange payment of $50 per $1,000 principal amount.

Holders tendering their notes after the early deadline will only be eligible to receive the exchange consideration of $950 per $1,000 principal amount.

A portion of the exchange consideration will be payable in cash, and the remainder will be payable in principal amount of new notes.

The entire early exchange payment and a portion of the exchange consideration and of the early exchange consideration (after subtracting the early exchange payment) will be payable in cash, in an aggregate amount of $70 million, with the remainder of the exchange consideration and of the early exchange consideration (after subtracting the early exchange payment) payable in principal amount of new notes.

In other words, the cash payment is capped at $70 million; the greater the amount of existing notes tendered, the lower proportion of the exchange consideration and of the early exchange consideration (after subtracting the early exchange payment) payable in cash relative to the proportion of that consideration payable in new notes will be.

The company will also pay accrued interest to but excluding the settlement date.

New notes

The new Rule 144A and Regulation S notes will mature on Nov. 13, 2028.

The new notes will bear interest at a rate of (a) 12% per annum payable in cash or (b) at the election of the company, 12½% per annum, of which 10½% will be payable in cash and 2% will be payable by capitalizing that portion of the interest and adding it to the principal amount of the new notes. Interest will be payable semiannually in arrears on each May 13 and Nov. 13, commencing on May 13, 2024.

Consent bid

Mega is seeking to eliminate substantially all of the restrictive covenants and various events of default and related provisions contained in the indenture governing the existing notes.

The proposed amendments require the consents of holders of a majority in aggregate principal amount of the existing notes outstanding (excluding any notes held by the company or its affiliates).

Holders that tender their notes in the exchange offer will be deemed to have delivered consents to the proposed amendments with respect to those notes tendered.

The proposed amendments constitute a single proposal, and a tendering holder must consent to the amendments as an entirety and may not consent selectively or conditionally.

Details

The early exchange date is 5 p.m. ET on Oct. 26, which is also the deadline for withdrawing tenders and revoking consents.

The exchange offer and consent solicitation are scheduled to expire at 11:59 p.m. ET on Nov. 9.

The settlement date is expected to occur on the second business day after the expiration date.

The exchange offer and consent solicitation are subject to a number of conditions, including the condition that the company must, by the expiration date, enter into a loan agreement for enough cash proceeds to pay the cash portion of the early exchange consideration and the condition that the required consents must be obtained by the expiration date. The company has the option to waive these conditions in full or in part.

D.F. King & Co., Inc. will act as the information and exchange agent (877 732-3619, 212 269-5550; mega@dfking.com; www.dfking.com/mega).

Mega has retained Goldman Sachs & Co. LLC and BCP Securities, Inc. to act as dealer managers in connection with the exchange offer and as solicitation agents in connection with the consent solicitation.

The multiple purpose financial company is based in Jalisco, Mexico.

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