Doe Run Resources achieves threshold in exchange after deal with noteholders

The Doe Run Resources Corp. (Ca/D) said on Friday it achieved the minimum tender of notes to consensually complete its restructuring. The company added that it expects to complete the exchange by the end of the Oct. 21 week. The offer is still subject to completion of the negotiation and documentation of its senior loan agreement and working capital facility.

On Thursday (Oct. 17) Doe Run said it had reached an understanding with certain holders of its outstanding 11¼% Series B senior secured notes due 2005, 11¼% Series B senior notes due 2005 and floating interest rate Series B senior notes due 2003 regarding its previously announced revised exchange offer for the notes and the related solicitation of acceptances. The company said that under the terms of the understanding it expects to achieve the minimum tender threshold required to consensually consummate the revised offer. It accordingly again extended the expiration time of the offer to 5 p.m. ET on Friday (Oct. 18) from the previous deadline of Thursday (Oct. 17). Doe Run anticipates that as of the new expiration deadline it will accept for exchange all of the existing notes that have been tendered and proceed to consummate the transactions contemplated by the revised exchange offer.

Under the terms of the understanding, Doe Run amended its revised exchange offer so that senior secured note holders who tender their notes are to receive $680 principal amount of new 2008 notes per $1,000 principal amount of the existing notes tendered, while tendering holders of the senior notes and the floating rate notes would receive $580 principal amount of the new notes (increased from the previous consideration of $660 and $560 of the new notes, respectively, per $1,000 principal amount), plus as previously outlined, warrants to purchase up to 40% of the company's common stock, to be distributed to all of the tendering noteholders on a pro-rata basis .

Doe Run said that it had also agreed to modify the terms of the new exchange notes by modifying the "Limitation on Sale of Assets" covenant as detailed in the Offering Memorandum, so that the Doe Run, upon its consummation of a single asset sale or of several asset sales transactions resulting in total proceeds to the company of at least $20 million, would be required to use such proceeds to FIRST reduce debt secured by the sold assets and THEN to apply any remnant proceeds to a cash tender offer to the holders of exchange notes - in other words, Doe Run will NOT have the ability to reinvest such proceeds prior to making a tender offer to the holders of the exchange notes).

Doe Run further said that in the event that it does not achieve the amended minimum tender threshold (at least 95% of each series of the outstanding notes), it intends to file a Chapter 11 case and seek to confirm its prepackaged plan of reorganization in the U.S. Bankruptcy Court for the Southern District of New York, and said that as of the present date, it has received sufficient acceptances from the holders of the existing notes to confirm the plan. It said that in the event the plan is confirmed, holders of the existing notes will receive the consideration set forth in the Offering Memorandum (i.e. holders of the senior secured notes will receive $660 principal amount of exchange notes per $1,000 principal amount of senior secured notes and holders of the senior notes and floating-rate notes will each receive $560 principal amount of exchange notes per $1000 principal amount of the senior and floating-rate notes. Also in the event the plan is consumed, the "Limitation on Sale of Assets" covenant will not be modified as described.

Doe Run has also modified the terms of the plan to provide that holders who do not assign their rights and claims against the existing guarantors of the old notes arising under their respective guarantees of the old notes to Doe Run will receive exchange notes guaranteed by The Buick Resource Recycling Facility, LLC, a wholly owned subsidiary of Doe Run, but not by the existing guarantors of the old notes. In its previous form, the plan provided that such non-releasing holders would receive exchange notes not guaranteed by any person or entity.

Doe Run said that all holders of the existing notes are invited to participate in the revised exchange offer on the modified terms as outlined. It said that it will not permit holders to tender into the revised exchange offer less than all of the old notes of any particular tranche held by that holder ( e.g., a holder tendering floating-rate notes into the revised exchange offer would have to tender all of the floating-rate notes held by that holder). Holders who tender old notes into the revised exchange offer in violation of that provision risk having their tender declared defective by Doe Run, so that assuming the revised exchange offer is consummated, that holder shall receive no consideration of any kind on account of the revised exchange offer from Doe Run.

State Street Bank and Trust Co. in Boston (call 617 662-1548 or fax documents to 617 662-1452) is the exchange agent and the depositary for the offers. MacKenzie Partners, Inc. (call 212 929-5500 or toll-free 800 322-2885) is the information agent.

AS PREVIOUSLY ANNOUNCED: On April 15, The Doe Run Resources Corp, a St. Louis-based metals smelting company, announced that it had reached an agreement in principle with its corporate parent, New York-based industrial conglomerate The Renco Group, Inc. and with Regiment Capital Advisors, LLC, under which Renco and Regiment would provide Doe Run with significant capital that would enable Doe Run to restructure its existing debt. Doe Run said it planned to make a cash tender offer for a portion of its notes, and an exchange offer for the balance of the notes.

On May 16, Doe Run outlined the terms of the agreement in principle and announced its tender offer and exchange offer for the notes in an 8-K filing with the Securities and Exchange Commission, and announced further details of its planned refinancing, and officially began the tender offer and exchange offer on June 6. Doe Run subsequently extended the expiration deadlines for its tender and exchange offers several times, as the company attempted to obtain the required level of noteholder participation and to also hammer out the final terms of its planned new credit facility - part of the overall recapitalization of the company.

But on Aug. 23, Doe Run said that although it had by that point received tenders from holders representing 95% of the aggregate outstanding amount of its notes - an amount sufficient to satisfy the minimum tender conditions required for consummation of the offers in their then-current form - it would have to attempt to restructure the offers, citing the continuing market price erosion of its primary product, lead metal, which in turn had resulted in a decline in the company's available liquidity.

On Sept. 5, Doe Run said that it had reached an agreement in principle with major noteholder Regiment Capital Advisors, LLC on modifying the terms of its then-existing offers, eliminating the cash tender offer and senior loan participation which was at that time being offered to the noteholders. The exchange offer would meanwhile be amended to give each exchanging holder of the senior notes due 2005 and the floating interest rate senior notes due 2003 $560 principal amount of the newly issued exchange notes per $1,000 principal amount of the existing notes successfully exchanged, and to give each exchanging holder of the senior secured notes due 2005 $660 principal amount of the new exchange notes per $1,000 principal amount of the existing notes successfully exchanged. Each holder of existing notes would also receive a pro-rata share of warrants exercisable for an aggregate of 40% of the outstanding common stock of Doe Run, assuming the participation by the holders of all of the outstanding existing notes. The warrants would be allocated to exchanging noteholders according to the percentage that the existing notes successfully tendered for exchange by each holder bears to the aggregate amount of all of the existing notes outstanding.

Doe Run additionally said that the previously announced Senior Loan connected with the company's restructuring would be in an aggregate amount of $15.5 million, would mature thirty months from the closing of the transaction, would bear interest at an annual 11¼% rate, would not require any amortization payment until maturity and said that all warrants previously associated with the Senior Loan have been eliminated. It further said that the minimum tender required to effectuate the revised exchange offer would be 95% of each series of existing notes outstanding.

The company said that the new exchange notes would mature on Nov. 1, 2008, and bear interest payable semiannually, as follows: Through calendar year 2005, interest may be paid, at the sole option of Doe Run, at the annual rate of either 3% in cash and 11% paid in kind [i.e. in additional notes] OR 8% paid solely in cash. For all interest payment dates after calendar year 2005 and until the exchange notes mature, interest would be payable semiannually, and only in cash, at the annual rate of 11¼%. It said that the collateral securing the Senior Loan and the exchange notes would be substantially similar to that previously set forth in the official Offering Memorandum.

Doe Run said that to the best of its knowledge, holders of approximately 95% of the aggregate amount of the outstanding existing notes had to date tendered their notes for participation in the existing (or old) offers. It said that holders desiring to tender their notes into the revised exchange offer and related consent solicitation would have to fill out new Letters of Transmittal and could get information on the procedure from the information agent for the offer or from their broker, dealer, commercial bank or trust company.

On September 23, Doe Run said that it had formally begun a revised exchange offer and related consent solicitation for all of its outstanding 11¼% senior and senior secured notes, and for its floating interest rate notes, with the revised offer to exchange new notes and warrants for the company for the existing notes superseding Doe Run's previously announced exchange offer for those securities. The general terms of the revised offer had already been previously announced. It was scheduled to expire at 5 p.m. ET on Oct. 4 , although the company said it reserved the right to extend the offer to a second expiration date of Oct. 15, at which time the company said it expected to either consummate the exchange offer as planned, subject to the satisfaction of the minimum tender condition and all of the other conditions outlined in its offer, or, alternatively, to commence a Chapter 11 reorganization case (the offer was in fact subsequently extended to this second expiration deadline).

In addition to offering to exchange the existing notes for the newly issued notes and warrants under the terms of the revised offer, Doe Run said it was soliciting consents to proposed changes in the indentures of the existing notes to eliminate substantially all of the restrictive operating and financial covenants and modify a number of the event-of-default provisions and various other provisions in the existing notes. The tender of those notes in the exchange offer would constitute consent to those amendments.

Doe Run said that if a noteholder were to not tender its existing notes and the exchange offer were to be consummated anyway, Doe Run may leave such unexchanged old notes outstanding, but also reserves the right - but is under no obligation - to purchase such notes in open market purchases, negotiated transactions or otherwise, for consideration either similar to or different from that offered in the exchange offer; to defease such notes pursuant to the terms of their indentures; or as otherwise agreed with the holder of such existing notes, to redeem the notes in accordance with their terms. Such potential transactions would be subject to the terms of the New Senior Credit Facility and the Congress/CIT Credit Facility into which the company is entering.

Doe Run said that in the event that such existing notes are not tendered under the exchange offer and are left outstanding and the exchange offer is successfully consummated, holders of the still- outstanding notes would not be entitled to the benefit of substantially all of the restrictive operating and financial covenants and certain event of default provisions presently contained in the indentures for those notes, once the proposed amendments have been approved and take effect.

Doe Run further said that it was simultaneously seeking acceptances from the holders of its existing notes to the previously outlined restructuring/reorganization plan. If the Minimum Tender (of at least 95% of each series of the outstanding notes) is not achieved but the requisite acceptances needed for confirmation of the pan are achieved (from (a) holders of at least 66 2/3% of the aggregate principal amount of each of the three series of notes and (b) a majority in number of holders, in each case actually voting on the plan, Doe Run intends to commence a Chapter 11 case in the U.S. Bankruptcy Court for the Southern District of New York and to seek to have the Court confirm the Plan. Doe Run said that noteholders desiring to tender their notes under the revised offer and consent solicitation would have to fill out a revised Letter of Transmittal.

On Oct. 4, Doe Run said that it had extended its revised exchange offer to 5 p.m. ET on Oct. 15, as previously planned, and said that as of the previous Oct. 4 deadline, it had received indications of support for its revised offer from the holders of approximately 73% of the total outstanding amount of the three series of notes - less than the 95% of each series required to consummate the offer, causing the offer to be extended.

Even though Doe Run had previously indicated that it did not expect to further extend that offer again, but would instead proceed to either consummate the offer as scheduled or commence a Chapter 11 reorganization (assuming it had received requisite participation from its noteholders as previously outlined), the company said on Oct. 16 that it was again extending the expiration time of its offer until 5 p.m. ET on Thursday, (Oct. 17) in order to continue what it called "productive conversations with certain holders of its Old Notes" to enlist their support for the company's exchange offer and recapitalization transactions. It said that as of Oct. 16, the holders of 84% of the aggregate principal amount of the outstanding notes had tendered their notes into the Revised Exchange Offer.

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