Grupo Idesa begins exchange, seeks consents for 9 3/8% notes

By William Gullotti

Buffalo, N.Y., March 28 – Grupo Idesa, SA de CV has begun an exchange offer and consent solicitation for any and all of its outstanding 9 3/8% secured notes due 2026 (Cusips: P4954WAB6, 40053LAB1) for new 6˝% senior notes due 2028, according to a press release on Tuesday.

As of March 28, $311,045,336 of the existing notes were outstanding; however, the outstanding amount will increase through the settlement date as the applicable PIK interest accrues.

The 2026 notes were issued in connection with a similar consent solicitation and exchange offer for its 7 7/8% senior notes due 2020 (Cusips: 40053LAA3, P4954WAA8), which settled in May 2020.

Prior to the early tender deadline, expected April 11, participating noteholders will have two options to select when tendering notes.

If eligible holders validly tender an aggregate principal amount of no more than $100 million under “Option A,” they will receive $0.775 in cash per $1.00 principal amount of tendered notes, up to an aggregate cash consideration of $77.5 million, payable on a pro rata basis.

If an aggregate principal amount exceeding $100 million are tendered under “Option A,” participating holders will receive a combination of the aforementioned cash consideration and new 2028 notes. The combination will be the difference between (i) the aggregate principal amount of notes validly tendered on or prior to the early tender date and (ii) $100 million will be paid ratably to eligible holders with $1.00 of new secured notes received for each $1.00 principal amount of existing secured notes tendered.

Eligible holders who tender on or prior to the April 11 early tender date under “Option B” will receive $1.00 of new secured notes for each $1.00 principal amount of existing secured notes tendered.

Holders tendering after the early tender date but prior to the expiration date will receive the base consideration of $0.95 of new notes for each $1 of existing notes, independent of selected option.

The company said it will also pay accrued interest on the existing notes through and including the settlement date in cash.

Consent solicitation

Grupo Idesa said it is also soliciting consents from the holders of the outstanding 2026 notes to amend or waive provisions of the indentures governing the notes. The company is seeking to eliminate or amend certain covenants and other operative provisions of the indenture and to release the liens on all of the collateral currently securing the existing notes.

The new 2028 notes are unconditionally guaranteed by several subsidiary guarantors, adding Etileno XXI, SA de CV to the list of subsidiaries that previously guaranteed the 2026 notes: Alveg Distribucion Quimica, SA de CV, Excellence Sea & Land Logistics, SA de CV, Industrias Derivados del Etileno, SA de CV, Inmobiliaria Idesa, SA de CV, Sintesis Organicas, SA de CV and Novidesa, SA de CV.

In addition to adding Etileno XXI as a guarantor, the collateral supporting the new secured notes have been enhanced by (i) a first-priority lien on all shares of Etileno XXI; (ii) a conditional first-priority lien on any receivables (net of any taxes and retentions) payable to the company and Etileno XXI under the Braskem Idesa shareholder loans; and (iii) a first-priority lien on all of the company's right to collect payment from available funds in respect of the Braskem Idesa shareholder loans. The new notes will rank effectively senior in right of payment to all of the company’s existing and future unsecured debt, including the existing notes, to the extent of the collateral.

Notes tendered and consents delivered will be irrevocable.

The offer and solicitation will expire at 5 p.m. ET on April 25.

As with its 2020 exchange offer and consent solicitation, the company said it intends to apply to list the new notes on the Luxembourg Stock Exchange.

The Rule 144A and Regulation S offering and solicitation are conditioned on the company receiving tenders of at least 85% of the outstanding principal amount of existing notes. It is further conditioned on the successful closing of a borrowing agreement with an affiliate for a loan of up to $77.5 million for a period of 5.5 years at an interest rate no greater than 6˝% to fund the cash consideration.

Global Bondholder Services Corp. (212 430-3774 for banks and brokers, 855 654-2015 toll free, info@gbsc-usa.com) is the exchange and information agent.

The chemical company is based in Mexico City.

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