KazMunayGas holders vote to amend seven note series at Monday meeting

By Susanna Moon

Chicago, July 27 – JSC National Co. KazMunayGas said it collected the needed noteholder votes to amend seven series of notes.

The noteholder meetings were held July 27, and the measures passed for each series of notes, according to a company notice.

The solicitation ended at 11 a.m. ET on July 24, with settlement set for July 31.

As announced June 30, the consent fees for each $1,000 principal amount are as follows:

• $1.6 billion 9 1/8% notes due 2018 with an early consent fee of $3.00 and a late consent fee of $1.00;

• $1.5 billion 7% notes due 2020 with an early consent fee of $5.00 and a late consent fee of $1.50;

• $1.25 billion 6 3/8% notes due 2021 with an early consent fee of $5.00 and a late consent fee of $1.50;

• $1 billion 4.4% notes due 2023 with an early consent fee of $15.00 and a late consent fee of $5.00;

• $500 million 4 7/8% notes due 2025 with an early consent fee of $15.00 and a late consent fee of $5.00;

• $2 billion 5ľ% notes due 2043 with an early consent fee of $25.00 and a late consent fee of $7.50; and

• $1 billion 6% notes due 2044 with an early consent fee of $25.00 and a late consent fee of $7.50.

As previously reported, the company sought holder consents to permit the proposed sale by Cooperatieve KMG UA, a company wholly owned by KMG, of 50% of its shares in KMG Kashagan BV to JSC Sovereign Wealth Fund.

The consent to the Kashagan sale is required under the notes’ limitation on sales of assets and subsidiary stock, which would otherwise require the company retain at least the restricted percentage of 75% of KMG Kashagan BV’s shares.

The sale of the Kashagan shares to Samruk-Kazyna will be made on arm’s length terms and at fair market value, with the support of an independent appraisal, the company previously noted.

The purchase price is expected to be about $4.7 billion, and the sale is expected to close before the end of 2015.

Amendments sought

The company sought holder approval for the following amendments to the conditions:

• To amend the definition of consolidated KMG net debt to reflect that, in the calculation as of June 30 and for each relevant calculation date after that through Dec. 31, 2018, KMG will be permitted to deduct cash and temporary cash investments of any member of the group;

• To amend the definition of debt to clarify that as of June 30 and for each relevant calculation after that all financial and accounting terms used in the conditions will be determined under IFRS and tested by reference to the consolidated financial statements most recently delivered; and

• Also any obligation or instrument, which is given equity capital treatment under IFRS, will not be regarded as debt for any purpose under the conditions.

The implementation of the cash application amendment will allow cash and temporary cash investments held by any member of the group to be deducted in the calculation of consolidated net debt for the purposes of the relevant financial ratio as of June 30 and for each relevant calculation after that until and including Dec. 31, 2018.

Under the existing conditions, the company is permitted to incur additional debt only if the ratio of consolidated net debt as of any date of determination on a pro forma basis to the aggregate amount of consolidated EBITDA for the most recent two semiannual financial periods for which consolidated financial statements have been delivered does not exceed 3.5 times and in calculating consolidated net debt for the purposes of determining compliance with this limitation, to deduct cash and temporary cash investments of the company and KazMunaiGaz Finance Sub BV, but not cash and temporary cash investments of other members of the group.

Approval is being sought “to address the impact of recent declines in the global price of oil and other exogenous factors, as well as the ongoing operational challenges and resulting delayed production in connection with the NCP, which have negatively impacted the relevant financial ratio,” the company said in the press release.

The company said that while the Kashagan sale and the debt reduction program will help improve the relevant financial ratio over a longer time horizon, the implementation of the cash application amendment is expected to give “immediate but temporary additional flexibility” to allow the company to continue to incur additional debt within the relevant financial ratio for the purposes of meeting its capital expenditure commitments for ongoing projects.

More details

Noteholder consent was sought to approve, with retroactive effect, the fixing of the record date for the proposal at June 30.

Holders who submitted an electronic voting instruction or a form of sub-proxy in favor of the extraordinary resolution by 10 a.m. ET on July 17, the early consent date, will receive the early consent fee, as long as all of the proposals are passed and become effective.

Those who vote for the measure after the early consent deadline will receive the late consent fee.

Holders must be of record as of 5 p.m. ET on June 30.

The global solicitation agents are Deutsche Bank AG, London Branch (+44 0 20 754 76153 / +44 (0) 20 754 76568 or kmg.lm@list.db.com), UBS AG, London Branch (+44 0 20 7567 0525 or mark-t.watkins@ubs.com / torstein.berteig@ubs.com or 203 719-4210 or 888 719-4210).

The Kazakhstan solicitation agent is SB Capital, LLP (+7 727 311 06 51 or a.salmanov@sbcapital.kz / a.lyu@sbcapital.kz).

The tabulation agents are Deutsche Bank AG, London Branch (+44 (0) 20 7547 5000, xchange.offer@db.com or fax +44 0 20 7547 6149), Deutsche Bank Trust Co. Americas, c/o DB Services Americas, Inc. (877 843-9767, DB.Reorg@db.com or fax 615-866-3889).

KazMunayGas is an Astana, Kazakhstan-based state-owned oil and gas company.

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