FS Luxembourg sees early tenders for 70.68% of 10% notes due 2025

By Marisa Wong

Los Angeles, Feb. 8 – FS Luxembourg Sarl, a wholly owned finance subsidiary of FS Industria de Biocombustiveis Ltda., announced the early results of Morgan Stanley & Co. LLC’s Jan. 25 cash tender offer for any and all of the outstanding $446,317,000 of 10% senior secured notes due 2025 (Cusip: 30315XAB0, L40756AB1) issued by FS Luxembourg and guaranteed by its parent company and FS I Industria de Etanol SA. Notes tendered and purchased by Morgan Stanley as offeror will be exchanged by the offeror with issuer FS Luxembourg.

As of 5 p.m. ET on Feb. 7, the early tender deadline, holders of $315,456,000, or 70.68%, of the outstanding notes had tendered their notes for purchase and delivered consents under the related consent solicitation, according to a press release late Wednesday.

Concurrently with the tender offer, the offeror is soliciting consents from holders for the adoption of proposed amendments to the indenture governing the notes. The proposed amendments would eliminate the collateral package under the indenture; eliminate substantially all of the restrictive covenants, as well as various events of default and related provisions contained in the indenture; and reduce the minimum notice period to holders in the case of an optional redemption from 30 days to three business days.

Because the two-thirds consent was obtained, the issuer and the guarantors will execute a supplemental indenture to the indenture governing the notes. However, the supplemental indenture and the proposed amendments will not be effective and operative until the final settlement date and consummation of the exchange.

Adoption of the proposed amendments will have adverse consequences for holders who elect not to tender their notes in the tender offer, the issuer cautioned in its latest announcement.

The offeror is offering a total consideration of $1,046.25 per $1,000 principal amount. The total consideration includes an early tender payment of $50 per $1,000 of notes tendered by the early tender deadline.

Holders tendering after the early deadline will only be eligible to receive the tender offer consideration of $996.25 per $1,000 principal amount.

In addition to the total consideration or tender offer consideration, holders will receive accrued interest.

Holders who tender notes must also consent to the proposed amendments, and holders may not deliver consents to the proposed amendments without tendering their notes. Holders may not revoke their consents without withdrawing the related previously tendered notes. As of the early tender deadline, tenders may no longer be withdrawn.

In order for the proposed amendments to be adopted, consents for the proposed amendment for elimination or changes of covenants had to be received for a majority of the aggregate outstanding principal amount of the notes, and consents for the proposed amendment for collateral removal had to be received for at least two-thirds of the aggregate outstanding principal amount. Because the two-thirds consent was obtained, a consent for the proposed amendment for elimination or changes of covenants was also deemed to be obtained.

Early settlement is expected to occur on Feb. 8.

The tender offer and consent solicitation will expire at 5 p.m. ET on Feb. 23. Final settlement is expected to be one business day after the expiration time.

The tender offer is subject to a financing condition and is also conditioned on, among other things, the exchange settlement agreement between the offeror, the issuer and the guarantors remaining in effect until the final settlement date.

Morgan Stanley & Co. LLC is acting as dealer manager and as solicitation agent.

D.F. King & Co., Inc. (800 283-9185, 212 269-5550; fs@dfking.com) is the information agent and tender agent.

The ethanol producer is based in Sao Paulo, Brazil.

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