DTEK further extends consent solicitation, tender for 2027 PIK toggle notes

By Mary-Katherine Stinson

Lexington, Ky., Oct. 5 – DTEK Energy BV released a notice on Thursday that it has again extended its amended and restated tender offer relating to the 7%/7˝% senior secured PIK toggle notes due 2027 (ISIN: XS2342930521) originally issued by DTEK Finance plc, with DTEK Energy as successor issuer.

The expiration deadline has been pushed to noon ET on Oct. 10 from the same time on Oct. 4. Originally the expiration date was Oct. 2.

The results are expected to be announced on Oct. 11, with settlement slated for Oct. 30.

The release noted that the amended terms of the proposed amendments have received support from a group of noteholders.

Amended offer

As previously reported, under the amended and restated memorandum on Sept. 25, DTEK Holdings and DTEK Energy extended the deadlines for submissions of the instructions and other relevant dates; decided not to decrease the maximum acceptance amount and have provided for a form of instruction to permit holders to revoke their consents to the extent their tender offers are not accepted; increased the consent consideration to 1%; and made some revisions to the proposed amendments.

All tender instructions and consent only instructions submitted prior to Sept. 25, the date of the updated tender offer and consent solicitation memorandum, were deemed revoked as of Sept. 25. Noteholders must resubmit their tender instructions and consent only instructions at or prior to the new expiration deadline in order to participate in the tender offer or consent solicitation.

The tender and tabulation agent is GLAS Specialist Services Ltd. (+44 20 3597 2940; lm@glas.agency).

Creditor objection

According to an announcement on Sept. 27, there was creditor opposition to DTEK Holdings Ltd. and DTEK Energy’s publication of the amended and restated offer and consent solicitation memorandum to their initial Sept. 12 tender offer and consent solicitation for the notes.

Following the publication of the memorandum, an ad hoc group of holders of the notes engaged Cleary Gottlieb Steen & Hamilton LLP and entered into discussions with the issuer and the offeror with respect to the terms of the consent solicitation and the tender offer.

Although the amended and restated memorandum incorporated a number of comments raised by the ad hoc group, the issuer has largely retained proposed amendments to the restricted payments covenant contained in the indenture and to some related definitions, despite the concerns expressed by the ad hoc group, according to the Sept. 27 press release.

Purportedly, the effect of the proposed amendments to the restricted payments covenant is two-fold: the amendments to the definition of “consolidated net income” have the effect of substantially inflating the consolidated net income compared to how it is calculated under the existing indenture provisions; and the amendments to section 4.06 of the indenture have the effect of permitting the parent guarantor and the restricted subsidiaries to make material restricted payments that are not permitted under the existing indenture provisions.

In particular, the new additions to the definition of the consolidated net income result in additional positive adjustments to the consolidated net income for the year ended Dec. 31, 2022 of about UAH 25.9 billion and in additional positive adjustments for the six months ended June 30 of about UAH 4 billion.

As a result, immediately after implementation of the proposed amendments to the indenture the issuer would evidently have the ability to make restricted payments in the amount of about $493.5 million if the consolidated leverage ratio does not exceed 2.5 to 1.0 and $740.3 million if the consolidated leverage ratio does not exceed 2.0 to 1.0.

The ad hoc group said it believes that the proposed amendments would be materially prejudicial to the interests of the noteholders, because it would allow the shareholder to receive substantial amounts from the parent guarantor prior to the repayment of the notes.

The Sept. 27 release pointed out that the notes are the product of a distressed debt exchange conducted in 2021, which itself followed a prior distressed debt exchange in 2017. The covenants of the notes, including limitations on restricted payments and the excess cash sweep mechanism, were negotiated by noteholders in exchange for extensive concessions in payment terms provided to the issuer.

The ad hoc group believes the current proposal voids these negotiated protections. In light of the foregoing, the ad hoc group is of the view that noteholders should not vote in favor of the proposed amendments, according to the prior press release.

The ad hoc group proposed a call for noteholders at 9:30 a.m. ET on Sept. 28 to discuss further the proposed amendments in the amended and restated memorandum.

Noteholders were invited to contact Solomon J. Noh (sjnoh@cgsh.com; office: +44 20 7614 2306 or mobile: +44 78 4132 3679), Alastair Goldrein (agoldrein@cgsh.com; office: +44 20 7614 2322 or mobile: +44 77 3417 1953) or James Armshaw (jarmshaw@cgsh.com; office: +44 20 7614 2216 or mobile: +44 75 8105 3809) of Cleary Gottlieb Steen & Hamilton if they wanted the details to join the noteholder call or to discuss the contents of the Sept. 27 press release.

DTEK is an energy company based in Kyiv, Ukraine.

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