Metaldyne plans to hold consent solicitation without tender offer for 10%, 11% notes

By Angela McDaniels

Seattle, Nov. 16 - Metaldyne Corp. plans to hold a consent solicitation for its $150 million 10% senior notes due 2013 and $250 million 11% senior subordinated notes due 2012 without holding the previously planned tender offer, according to an 8-K report filed with the Securities and Exchange Commission on Wednesday.

The company will solicit consents to modify the indentures governing the notes to allow its merger with Asahi Tec Corp. and related transactions, to allow a distribution of shares of the common stock of subsidiary TriMas Corp. and to waive the change-of-control provisions.

Noteholders who consent will receive a cash consent fee equal to 8% of the principal amount of 10% notes held and 12.75% of the principal amount of 11% notes held and, if permitted by the company's lenders, a junior lien on the assets of Metaldyne and its domestic subsidiaries that are pledged to secure its new credit facilities.

In addition, the company plans to holder a tender offer for up to $25 million of the 10% notes at par plus accrued interest following the closing of the merger.

Metaldyne said it must receive consents from holders of a majority of the notes for the merger to proceed and that the payment of any consent fees is conditioned upon the closing of the merger.

Holders of more than 60% of the 10% notes and holders of 57% of the 11% notes have entered into lockup agreements. Under the 10% notes agreement, noteholders will provide any requested consent only if such consents are agreed to by holders of 80% of the notes held by the signatories. Under the 11% notes agreement, noteholders will provide consents only if such consents are agreed to by 90% in principal amount of the notes and two-thirds of the noteholders who signed the agreement.

The company planned to hold a tender offer for a minimum of $225 million of the 11% notes and 10% notes in connection with its Sept. 1 agreement to be acquired by Asahi Tec.

Subsequently, Metaldyne and Asahi Tec began discussions as to whether the tender offer "should be pursued on the previously contemplated basis or at all" in light of production cutbacks and inventory reductions at Ford Motor Co., DaimlerChrysler Corp. and General Motors Corp. and Metaldyne's expectation that financial results for the third quarter will be lower than expected.

The companies then received notice that holders of a majority of the notes objected to the basis on which Metaldyne and Asahi Tec had proposed to solicit their consents and were unwilling to participate in the contemplated tender offer and consent solicitation, according to an earlier 8-K filing with the Securities and Exchange Commission.

Since that time, Metaldyne and Asahi Tec entered into discussions with the noteholders to consider alternative means of obtaining consent. The company said committees representing both series of notes have agreed in principal with the proposed consent solicitation, but the committee for the 10% notes asked that the maturity date of the note be shorted to before that of the 11% notes and that the TriMas shares be retained by Metaldyne and pledged as collateral for the notes.

In addition to the consent solicitation, Metaldyne plans to make a mandatory offer to purchase notes at par with 50% of the net proceeds, up to $50 million, of any Asahi Tec equity offering contributed to Metaldyne and to permanently reduce the debt incurrence restrictive covenant in the permitted senior credit facility basket when prepayments are made to the new credit facilities, according to the filing.

Asahi Tec also indicated that it will make changes to Metaldyne's corporate structure to enhance the security package to be offered to noteholders: a new intermediate holding company will be inserted between Metaldyne and the borrower of the new credit facilities, Metaldyne Co. LLC, to act as a holding company guarantor of the new credit facilities and a guarantor of the notes. Metaldyne would not be a guarantor of the new credit facilities and interests in the new holding company would be pledged to secure the notes.

As a result of the anticipated changes in the cost of the transaction and the impact of customer production declines on Metaldyne, Asahi Tec's willingness to proceed with the acquisition will require that Metaldyne stockholders forego a portion of the previously agreed cash merger consideration, according to the filing. Consequently, Metaldyne expects that, if the acquisition proceeds, payments to Metaldyne common stockholders will be materially reduced.

Metaldyne is a Plymouth, Mich., supplier of powertrain and chassis systems and components.

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