Grupo Kaltex begins offer to exchange 2022 notes for 2025 notes

By Marisa Wong

Los Angeles, Nov. 15 – Grupo Kaltex, SA de CV announced it has begun an exchange offer for its outstanding 8 7/8% senior notes due 2022 (Cusips: 40054FAA5, P4953VAJ2).

The company is inviting holders to exchange up to $118 million of the existing notes for up to $118 million of 14½% senior notes due 2025 to be issued by Grupo Kaltex and guaranteed by some of its subsidiaries, plus an accrued interest payment and an exchange premium.

The exchange offer will expire at 11:59 p.m. ET on Dec. 12. Tenders may be withdrawn prior to that time.

Existing notes

The existing notes matured on April 11, 2022. However, Grupo Kaltex defaulted on the payment of the outstanding principal amount.

Prior to the scheduled maturity of the notes, Grupo Kaltex repurchased $102 million of the notes in the open market during 2021 and in early 2022.

As of Nov. 15, $218 million of the notes remains outstanding.

On Oct. 11, Grupo Kaltex paid accrued interest on the notes from and including April 11, 2022 to but excluding Oct. 11.

Exchange details

Subject to the $118 million exchange offer cap, holders who tender their existing notes for exchange and whose notes are accepted for exchange will receive, for each $1,000 principal amount of existing notes, $1,000 of new notes, a cash payment equal to the amount of interest accrued from and including Oct. 11 to but excluding the settlement date of the exchange offer and a $15.00 cash payment.

In the event that the aggregate principal amount of existing notes tendered prior to the expiration date exceeds the offer cap, then tenders will be accepted for exchange on a prorated basis.

Any existing notes tendered and not accepted for exchange as a result of proration, together with any other existing notes not tendered in the exchange offer, will, as a condition to the consummation of the exchange offer, be redeemed in full on the settlement date.

In other words, if the exchange offer is completed, on the settlement date, the full outstanding aggregate principal amount of the existing notes will be either be exchanged for new notes or repaid in cash.

TSA

Grupo Kaltex entered into a transaction support agreement on Nov. 4 with the subsidiary guarantors of the existing notes, guarantors of the new notes and some holders of existing notes.

The TSA supporting noteholders have agreed to tender their existing notes in the exchange offer.

In addition, Grupo Kaltex entered into letter agreements with existing guarantors, new notes guarantors and additional supporting noteholders, where the additional supporting noteholders agreed to tender their notes in the exchange offer.

The supporting noteholders represent 44% of the existing notes outstanding as of the start of the exchange offer (with 35% representing the TSA supporting noteholders and 9% representing the additional supporting noteholders).

The TSA also contemplates a contractual commitment from some supporting noteholders to purchase, on the settlement date of the exchange offer, up to $20 million of new notes at par. This commitment will be reduced on a dollar-for-dollar basis to the extent that more than $98 million of new notes are issuable in the exchange offer.

The funding commitment letter requires the company to pay to each new money notes funding party a 5% commitment fee, payable as follows: 1/5 paid to the relevant new money notes funding party in cash in dollars on Nov. 4, the date of execution of the funding commitment letter; and 4/5 payable to the relevant new money notes funding party in cash in dollars on the exchange offer settlement date.

Conditions

The exchange offer is subject to some conditions, which Grupo Kaltex may waive in full or in part at its discretion, but subject to the terms of the TSA. These include the condition that at least $98 million of existing notes be tendered and the financing condition.

New notes

The new notes will mature on Sept. 30, 2025.

Interest will accrue at 14½% per annum, with up to 1½% payable in the form of PIK notes.

The new notes will be guaranteed by subsidiaries Kaltex America, Inc., Kaltex Apparel, SA de CV, Kaltex Comercial, SA de CV, Kaltex Home, SA de CV, Kaltex Internacional, SA de CV, Kaltex Textiles, SA de CV and Manufacturas Kaltex, SA de CV.

The issuance of the new notes is conditioned upon, and is expected to occur simultaneously with, the redemption in full of any existing notes that are not exchanged in the exchange offer.

BCP Securities, Inc. is dealer manager for the Rule 144A and Rule 902 exchange offer.

D.F. King & Co., Inc. (888 541-9895, 212 269-5550; kaltex@dfking.com; www.dfking.com/kaltex) is information and exchange agent.

Grupo Kaltex is a textile company based in Mexico.

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