Millar Western adds holder support in effort to swap out 8˝% notes

By Susanna Moon

Chicago, March 23 – Millar Western Forest Products Ltd. reported additional support for the proposed exchange for its $210 million principal amount of 8˝% senior notes due 2021.

The company said on March 8 that it had proposed to exchange the notes for new dollar 9% senior secured notes due 2022 with a principal amount equal to 50% of the par amount of the existing notes plus new secured notes equal to another 5% of the par amount of existing notes held by those who vote in favor of the plan of arrangement by the early consent date of March 31.

The funds affiliated with Atlas Holdings LLC, which beneficially own about 36% of the existing notes, had signed a support agreement with the company to vote in favor of a plan of arrangement at a noteholder meeting scheduled for April 11.

Since then, holders of another 28% of the notes have agreed back the company's plan of arrangement, thereby increasing the total noteholder support to 64% of the existing notes, according to a company update on March 22.

As previously announced, the transaction requires that funds affiliated with Atlas Holdings LLC agree to exchange about $41.7 million of principal amount of new secured notes it receives under the exchange for 80% of the outstanding shares of the company, which would further lower the company’s annual cash interest costs by about another $3.75 million and enhance the position and credit quality of the remaining new secured notes. After the share exchange, the principal amount of new secured notes outstanding will be about $71 million.

The new secured notes will be secured on a first-lien basis by substantially all of the assets and property of the company, subject to the existing first-lien security over the company’s accounts receivable and inventory granted by the company to its bank lender.

The exchange would reduce the company’s debt by about $97 million, cut its annual cash interest costs by more than $7 million and provide an extended maturity date for the new secured notes.

The exchange will be implemented by way of the plan of arrangement and is expected to be completed by April 28.

The record date is 5 p.m. ET March 8.

The exchange requires approval of the plan of arrangement by votes for at least 66 2/3% of the votes cast by noteholders represented at the meeting set for 10 a.m. ET on April 11.

Kingsdale Advisors (866 581-0512, 416 867-2272 or contactus@kingsdaleadvisors.com) is information and exchange agent.

Edmonton, Alta.-based Millar Western produces and markets hardwood and softwood bleached pulp and softwood lumber.

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