Northland Resources seeks funding solution; bondholders OK $6 million

By Caroline Salls

Pittsburgh, Feb. 28 - Northland Resources AB is in voluntary debt composition in Sweden and wants to reach an agreement for a long-term funding solution by March 4, according to a notice to bondholders from 13% and 12¼% senior secured bond trustee Norsk Tillitsmann ASA.

The trustee said Northland filed for reconstruction with the Lulea District Court in Sweden on Feb. 8 based on a shortage of liquidity to give the company enough time to finalize negotiations for a long-term financial solution.

Norsk Tillitsmann said the company entered voluntary debt composition because of its funding situation. Northland had invested more than $900 million in the Kaunisvaara project as of the end of December, and the Northland group identified a $450 million funding shortfall in January, the release said.

The trustee said Northland's ability to continue trading until March 4 depends on its continued access to cash receipts during the reconstruction period, primarily from tax refunds and iron ore concentrate sale proceeds.

Credit support needed

In addition, Norsk Tillitsmann said the company needs to obtain $12 million in credit support to provide liquidity during this period.

On Feb. 7, Northland asked the trustee to release $6 million from debt service accounts, with the remaining $6 million of the credit support intended to be provided by other stakeholders. Norsk Tillitsmann said talks are ongoing with the other stakeholders.

Norsk Tillitsmann said it received approvals from bondholders to release the $6 million of credit support ahead of a March 15 bondholders' meeting to formally vote on the request.

The advance will be structured as a voluntary prepayment by Northland in conjunction with and conditional upon a re-advance of those funds to the company on behalf of the bondholders in order to gain the benefit of priority ranking, the release said.

Although there is no guarantee that the expected liquidity package will be sufficient for the company to continue trading until March 4, the trustee said Northland would be forced into bankruptcy without the $12 million of credit support.

Northland is a Luxembourg-based producer of iron ore concentrate.

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