Ukraine’s DTEK 9˝% note exchange participation falls short; company to go ahead with scheme

By Toni Weeks

San Luis Obispo, Calif., April 23 – DTEK Finance plc announced the receipt of exchange instructions and consents from holders representing 91.14% of its $200 million principal amount of 9˝% guaranteed senior notes due April 28, 2015 issued by DTEK Finance BV, not enough to satisfy the minimum acceptance condition.

The company had previously raised the required level of participation to complete the exchange transaction to 98% from 85%. At the same time, it amended the terms of the new notes it planned to issue, lifting the early instruction fee to $30 from $20, setting the maturity to March 2018 instead of April 2019, requiring 50% of the notes to be redeemed in September 2017 on the interest payment date and shifting the interest payments to March and September from April and October.

As a result of the minimum acceptance condition not being met, no notes will be accepted in the exchange. However, DTEK said it will proceed with a proposed scheme of arrangement.

Exchange offer

DTEK announced the exchange offer and consent solicitation on March 23, warning that DTEK Finance BV was likely to be unable to repay the notes at their maturity.

Of the $200 million principal amount of outstanding notes, $24,546,000 is held by the issuer.

As originally announced, the company was offering a combination of new dollar-denominated 10 3/8% guaranteed senior notes (//expected C), now due March 2018 instead of April 2019, to be issued by DTEK and cash, according to a previous company announcement.

The exchange ratio is 80%, and the cash consideration is $200 per $1,000 principal amount of 9˝% notes.

Holders who tendered by the early exchange deadline, 5 p.m. ET on April 8, will also receive the upsized early instruction fee.

The company will issue up to $160 million of the new notes, downsized from the $170 million figure initially announced. The issue price will be par.

The issuer also solicited consents to proposed amendments to the indenture that would change the governing law of the indenture, the notes and the indenture guarantees to English law and include provisions for trustees that are market standard.

Consents were needed from the holders of at least a majority of the outstanding notes, excluding any notes held by the issuer and its affiliates, in order to adopt the proposed amendments.

The exchange offer and consent solicitation ended at 5 p.m. ET on April 22.

The offer was conditioned on the receipt of tenders for at least 98% of the principal amount of notes outstanding, excluding any notes held by the issuer and its affiliates.

Scheme

The issuer previously announced a scheme for the notes that involved applying to the High Court of Justice of England and Wales to request the sanctioning of a scheme of arrangement under which the issuer would be sanctioned by the court to acquire the outstanding 9˝% notes on the terms of the exchange offer.

Holders who tendered notes in the exchange offer will be deemed to give an irrevocable instruction in favor of the proposed scheme.

The issuer said previously that it reserved the right to proceed with the scheme even if the minimum acceptance condition was not met, and all irrevocable instructions will remain irrevocable even if the offeror elects not to complete the exchange offer.

The issuer expected to hold a noteholder meeting on April 23 to consider the scheme.

Votes in favor of the scheme were needed from at least half of the noteholders represented at the meeting and from the holders of at least 75% of the principal amount of 9˝% notes represented at the meeting.

If the court sanctions the scheme in a court hearing on April 27, the 9˝% notes will be acquired by the issuer, all of the then-outstanding 9˝% notes will be canceled, and the holders will receive the exchange offer consideration.

If the minimum acceptance condition is not satisfied and the exchange offer is not completed but the scheme becomes effective, all noteholders, whether or not they participate in the exchange offer and consent solicitation, will receive the new notes and the cash consideration.

If the minimum acceptance condition had been met and the offeror elected to complete the exchange offer and terminate the scheme, the holders of the 9˝% notes tendered in the exchange offer were to receive the new notes and the cash consideration, with the remaining 9˝% notes to be redeemed at maturity on April 28, 2015.

The issuer said that if the exchange offer was not completed and the scheme is not approved, it is unlikely to be able to repay the 9˝% notes on their maturity date, which would trigger an event of default under the 9˝% notes and cross defaults under some of the issuer’s other debt.

If the proposed amendments are made and the scheme is not approved or fails for any other reason, the noteholders would likely be left with a default of 9˝% notes governed by English law.

The dealer manager is Deutsche Bank AG, London Branch (+44 20 754 73693 or dtek.liability.management@list.db.com). The exchange agent is Bank of New York Mellon (+44 1202 689 644, 315 414 3360, debtrestructuring@bnymellon.com or ct_reorg_unit_inquiries@bnymellon.com).

DTEK Finance is part of an energy group based in Donetsk, Ukraine.

© 2015 Prospect News.
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