Pirelli seeks consents to add make-whole call to 1.75% notes due 2019

By Susanna Moon

Chicago, May 24 – Pirelli International plc said it began a consent solicitation to amend its €600 million of 1.75% notes due Nov. 18, 2019 guaranteed by Pirelli Tyre SpA.

A noteholders meeting has been set for June 17 in London.

Pirelli is asking for noteholder approval to include a make-whole issuer call to redeem some or all of the notes from time to time, according to a company announcement.

The company said that adding the ability to call the notes at a make-whole premium would allow Pirelli to more effectively manage the maturity profile of its debt.

The amendment also would provide Pirelli and its direct and indirect subsidiaries “with flexibility with respect to any potential changes in the financing and group structure of the Pirelli Group that the Pirelli Group may consider to take in the future,” the release added.

The make-whole amount would be an amount equal to the higher of par and the sum of the present value at the redemption date of par plus all required interest payments due on the notes through but excluding the maturity date, computed using a discount rate equal to the yield to maturity of the 0.25% Bund due Oct. 11, 2019 rate plus 50 basis points.

The consent fee will be 0.25% for votes sent by the early deadline and 0.1% for votes sent after the early deadline but by the expiration deadline.

The consent solicitation will remain open until 11 a.m. ET on June 14.

The quorum required for the meeting is one or more persons representing at least two-thirds of the outstanding notes. To pass, the measure requires a majority of votes from at least three-quarters of those represented.

Background

As background, the company offered details of a merger plan “aimed at implementing a long-term industrial partnership” between some companies with regard to Pirelli, “to strengthen its development plans, to cover geographically strategic areas and to achieve the integration of certain assets and activities of the Pirelli Group and [China National Tyre & Rubber Corp., Ltd.], as well as a future potential relisting of the Pirelli Group.”

Specifically, the transactions could result in a structural reorganization of the Pirelli Group involving CNRC, Fengshen Tires Stock Ltd. Co., a listed company controlled by CNRC, and the Pirelli Group’s industrial tire business, the release noted.

The reorganization is related to the recent acquisition of Pirelli, as part of the sale and purchase and co-investment agreement, the company added.

On Aug. 11, 2015, CNRC acquired a 26.2% stake in Pirelli from Camfin SpA, and through Marco Polo Industrial Holding SpA, they launched a mandatory tender offer for the remainder of the shares, resulting in Marco Polo owning 95.97% of Pirelli’s common shares. Marco Polo exercised the squeeze-out right under Italian law and purchased the remaining shares.

As a result of the purchase agreement, the subsequent tender offer and the squeeze-out procedure Marco Polo became the owner of 100% of the shares of Pirelli, including treasury shares held by Pirelli, and Pirelli’s shares were subsequently delisted from the Italian Stock Exchange on Nov. 6, 2015.

The acquisition of Pirelli by Marco Polo has been financed in part through drawdowns under a facilities agreement dated April 30, 2015 between Marco Polo and J.P. Morgan Ltd.

Marco Polo and Pirelli are expected to close their merger on June 1, and the Marco Polo facilities must be repaid within 60 days of that date.

There are two options to refinance the debt: Pirelli may enter into committed secured facilities due Dec. 31, 2016 with a group of lenders or the company may obtain new financing.

The solicitation agent is J.P. Morgan Securities plc (+44 20 7134 2468 or EMEA_LM@jpmorgan.com). The tabulation agent is Lucid Issuer Services Ltd. (+44 207 704 0880, Paul Kamminga, or pirelli@lucid-is.com). The information agent is Georgeson Srl (+39 06 42171 721/711, Monica Cempella / Gian Marco Pioppo, or proxy@georgeson.com). The principal paying agent is Deutsche Bank AG, London (+44 207 545 0864, Solidea Maccioni / Sue Ferguson /Lauren Taylor, or SolideaBarbara.macioni@db.com, sue.ferguson@db.com, lauren-x.taylor@db.com or sfs.italy@list.db.com).

Pirelli is a tire company based in Milan.

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