Northland bondholders approve bond terms; company resumes operations

By Susanna Moon

Chicago, June 4 - Northland Resources AB said bondholders approved the revised terms of its recently issued $335 million bond offering at a meeting held Tuesday. Some of the company's investors said Monday that liquidation was likely if bondholders rejected the company's plans.

The bondholder meeting was held in Oslo for the company's $270 million 13% senior secured bonds due 2017, its NOK 460 million 13% senior secured bonds due 2017 and its $20 million 12¼% senior secured bonds due 2017.

The new bond issue is part of the company's plan to obtain funding and restructure its existing bonds, as previously noted.

The settlement of the $335 million bond issue required approval of a two-thirds majority of the holders of the company's $370 million bonds, according to a company press release.

There were enough holders at the meetings to form a quorum, and the measure garnered 75.29% of the votes cast for the 13% bonds and 100% of the votes cast for the 12.25% bonds.

Afterward, bond trustee Norsk Tillitsmann decided to withdraw the acceleration and enforced bank account pledge effective since May 24, and the group regained full access to its funds in bank accounts, the release noted.

After having secured long-term financing for its operations, as well as immediate disposal of funds required for short-term use, the company said its board of directors decided to rescind the May 24 moratorium on the purchases of goods and services and to resume the group's operations.

Bond issue goes through

The company closed a $335 million bond offering on May 30 after it obtained $108 million of commitments from a new consortium for the previously canceled issue.

The consortium consisted of Folksam, Metso Corp., Norrskenet AB and Peab AB, with Swedbank First Securities as financial adviser.

Under the company's restructuring plan as announced on April 29, the principal amount of the existing bonds would be retained in full on a second-lien basis in the group's post-restructuring capital structure.

Previously, the company said that if shareholder approval were not received, the restructuring would be implemented by enforcement of a share pledge. This would result in Northland being owned and controlled by a new entity established for the benefit of the bondholders.

Arctic Securities ASA and Pareto Securities AS were the joint lead managers and bookrunners for the new bonds. Ocean Equities Ltd. was the co-lead manager.

Bond terms

The bonds have a 15% interest rate, increased from 12%, and mature July 15, 2019.

The company issued them at a 7% discount, which will result in $311.55 million of proceeds.

Investors who subscribed for the new bonds will receive warrants exercisable for 50% of the company's post-restructuring equity, increased from 14.2%.

Offering details

As a condition for completing the subscription, the consortium requested additional legal terms, including the right to nominate four out of seven candidates, including the chairman, to be appointed to Northland's board of directors.

To achieve this, the offering consisted of one bond with two tranches, where tranche B was fully subscribed by the consortium for $85 million nominal face amount with the right to nominate three candidates to the company's board of directors and tranche A for $250 million was open for subscription in the offering and will have the right to nominate one candidate to the company's board. The other two board members will be nominated by the holders of the existing $370 million bonds.

The consortium also agreed to invest for up to $23 million nominal face amount of the tranche A bonds if needed for full subscription of those bonds.

The changes to the terms of the offering, to the existing $370 million bonds as well as to the supplier credit related to Peab and Metso required bondholder approval at the June 4 meeting.

Bond issue previously canceled

Northland said on May 24 that it withdrew its senior secured bond offering and that it would instead establish a new bridge facility.

Despite a revision to the bond terms and issue size and two extensions of the subscription period, the bond offering had not been fully subscribed.

The company had launched the $362 million bond offering on May 7, as noted before. On May 20, it announced revised terms, reduced the issue size to $335 million and extended the subscription period.

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

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