Taiga offers to exchange 14% notes due 2020 for new 7% notes, stock

By Wendy Van Sickle

Columbus, Ohio, Oct. 2 – Taiga Building Products Ltd. launched an exchange offer and consent solicitation for any and all of its 14% subordinated notes due Sept. 1, 2020, according to a news release.

In a note option, Taiga is offering an equivalent amount of new five-year 7% notes. In a share option, Taiga is offering 833.33 common shares for each C$1,000 principal amount of notes tendered for exchange.

The share option is conditional upon Taiga receiving disinterested shareholder approval at a shareholder’s meeting scheduled for Oct. 26.

Taiga is also offering holders any combination of the note option and share option at the holder’s election.

The share exchange price represents an issue price of C$1.20 per common share, an 18.8% premium to the closing price on Aug. 4, the last full trading day before the company announced its intent to refinance the existing notes, and a 21.6% discount to the closing price of the shares on the trading day preceding the exchange offer.

The company will also pay accrued interest on the tendered notes.

There is C$128,834,218 of existing notes outstanding.

The offer will expire at 8 p.m. ET on Nov. 8.

Tenders may be withdrawn at any time prior to the offer’s expiration.

There is no minimum tender condition.

Taiga said it believes the exchange offer is in the best interests of the company and provides options to noteholders.

The company said the exchange offer will

• Allow it to reduce its financial leverage, providing greater opportunity for growth;

• Lower its cost of capital through lower interest payments on the new notes;

• Facilitate the company's transition from its current capital structure to a more normalized capital structure, which Taiga believes will provide it improved access to capital; improve its financial flexibility to pursue strategic initiatives; and enhance the market's understanding of the company by facilitating relative comparisons to its publicly traded industry peers;

• Provide enhanced liquidity in the common shares through the increase of the public float; and

• Provide liquidity to holders of existing notes.

The company is also soliciting consents to some proposed amendments to the note indenture to eliminate substantially all of the restrictive covenants, certain events of default and other related provisions. The proposed amendments require the consent of at least a majority of the principal amount of existing notes held by noteholders of record.

Noteholders of record tendering existing notes will be deemed to have delivered consent to the proposed amendments, and holders may not deliver consents without tendering their notes.

The new notes will bear interest semiannually, be unsecured obligations of the company that will be effectively subordinated to present and future secured debt and will be redeemable starting 30 months from the issue date. The initial redemption price will be 103.5; the price steps down to 101.75 at month 42 and to par at month 48.

Taiga said regardless of whether the exchange offer is consummated it intends to fully redeem the notes at par and/or purchase the existing notes through open market purchases prior to Dec. 31.

The company noted that a special committee of its board of directors unanimously determined that the potential share issuance offered in consideration for the existing notes is fair, from a financial point of view, to the disinterested shareholders of the company and unanimously recommended that the board recommend that the disinterested shareholders vote in favor of the share issuance resolution.

The board agreed and recommended that the disinterested shareholders vote in favor of the resolution at the Oct. 26 meeting.

Taiga Building Products is a Burnaby, B.C., wholesale distributor of building products.

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