8 Jul 2009 12:19
Not for distribution to any U.S. person or Italian person or to any person or address in the United States or the Republic of Italy (see "Offer and Distribution Restrictions" below).
Tender and Consent of OAO TMK in relation to TMK Capital S.A.'s outstanding U.S.$ 600,000,000 10.00% Loan Participation Notes due 2011 (ISIN: XS0373732063)
8 July 2009
OAO TMK ("TMK") announced today its invitation to Noteholders of TMK Capital S.A.'s U.S.$ 600,000,000 10.00% Loan Participation Notes due 2011 (the "Notes") to either (i) offer to sell for cash to TMK all or some only of the Notes held by them and to vote in favour of an Extraordinary Resolution (the "Tender Invitation"), or (ii) vote in respect of an Extraordinary Resolution in respect of their Notes, but without making an offer to sell such Notes (the "Consent Invitation"), in each case subject to the terms and conditions set out in the Tender and Consent Memorandum dated 8 July 2009 (the "Tender and Consent Memorandum").
TMK proposes to accept for purchase an aggregate nominal amount of Notes pursuant to the Tender Invitation such that the total amount payable by TMK (including all amounts payable in respect of accrued interest on Offered Notes accepted for purchase) in respect of (i) Notes validly offered for sale at the Early Offer Purchase Price or the Late Offer Purchase Price together with (ii) the payment of the Early Consent Fee and the Late Consent Fee, shall not exceed U.S.$425,000,000 (the "Total Invitation Funds Available").
In the event that Notes are validly offered for sale at the Early Offer Purchase Price or the Late Offer Purchase Price in a nominal amount which (if TMK were to accept all such Offered Notes), when aggregated with the payment of the Early Consent Fee and Late Consent Fee and all amounts payable in connection with accrued interest on such Offered Notes, would result in TMK paying in excess of the Total Invitation Funds Available then the acceptance of Offered Notes will be subject to pro-ration.
Capitalised terms used in this announcement have the meanings ascribed to them in the Tender and Consent Memorandum.
Background to the Proposals
TMK has been affected by a worsening of world macroeconomic and market conditions and corresponding challenges to the world and Russian pipe industry. Decline in pipe shipments since the start of the global crisis has mirrored the decline in overall pipe demand, which has been negatively affected primarily by the weak consumption of industrial pipes. Overall Russian pipe consumption in the first quarter of 2009 decreased by 33 per cent. compared to the first quarter of 2008. Although overall pipe demand was down, TMK's shipments of value-added seamless OCTG to the oil and gas sector were robust and increased by 6.3 per cent. in the first quarter of 2009 as compared to the first quarter of 2008. Successful execution of the proposed Invitations forms a key part of TMK's plan to successfully implement the refinancing of its short-term indebtedness and improve its liquidity position
The Invitations are being undertaken to modify certain restrictive covenants contained in the Loan Agreement and Loan Guarantee and to make a related amendment to each Loan Guarantor Deed of Accession as set out below under "Proposals relating to the Notes". TMK is undertaking this initiative in an effort to increase its financial flexibility to allow it to (i) continue to execute its current growth strategy and (ii) refinance existing indebtedness over the remaining term of the Notes.
Amendment to Permitted Indebtedness
TMK values its ability to continue its current sales growth despite a currently less favourable economic and operating environment. As such, TMK is seeking to increase the aggregate principal amount of indebtedness permitted under the definition of "Permitted Indebtedness" (as defined in the Loan Agreement) that may be incurred by the Borrower or a Subsidiary of the Borrower from U.S.$30 million to U.S.$100 million.
Amendment to Permitted Liens
Since the end of 2008 to present, the ability of TMK (and its peers) to access the international unsecured debt capital markets has been limited. This has created additional strain in the flexibility TMK previously had in refinancing its near-term debt. As a result, TMK may turn increasingly to raising debt capital on a secured basis in the local Russian markets over the remaining term of the Notes, which is expected to result in an increase in secured indebtedness. Therefore, TMK is seeking to increase the threshold of the aggregate principal amount outstanding of secured Indebtedness of the Borrower or any Subsidiaries of the Borrower at any one time from 15 per cent. to 40 per cent. of the total assets of the Group.
Amendment to Section 3.12(a) of the Loan Guarantee of U.S. Assets
TMK believes that the state of the U.S. steel market may improve over the remaining term of the Notes. This may result in opportunities for the TMK Group to raise debt capital on more favourable terms at the level of its U.S. Subsidiaries with U.S. financing counterparts, as opposed to, raising debt capital at the Group level. As a result, TMK is seeking to amend the covenant in the Loan Guarantee restricting limitations of dividends and other payments and certain other covenants in the Loan Guarantee affecting its U.S. Subsidiaries which guarantee TMK's obligations under the Notes to potentially allow for financing at the level of these and future U.S. Subsidiaries.
Proposals relating to the Notes
The Issuer is seeking approval by way of Extraordinary Resolution of the Noteholders, pursuant to Schedule 4 of the Trust Deed (a) to amend the definitions of "Permitted Indebtedness" and "Permitted Liens", in Clause 1.1 of the Loan Agreement, (b) to amend each of; the section of the Loan Guarantee entitled "Interpretation" and Clause 3.12 of the Loan Guarantee to modify a restriction on Loan Guarantors that have their registered office and/or principal place of business being located within the United States of America to allow for certain restrictions or encumbrances on their ability or the ability of their subsidiaries to pay dividends or make other distributions, make loans or advances to, or guarantee indebtedness, or other obligations of TMK or such Loan Guarantor, or to transfer any of their respective property or assets to TMK or such Loan Guarantor or any of their respective subsidiaries and (c) to amend the definition of Loan Guarantee in each Loan Guarantor Deed of Accession.
The Proposals
Tender Invitation
The Tender Invitation will provide that Noteholders may offer to sell Notes by submitting a Tender Instruction at any time during the Offer Period. TMK or its nominee proposes to accept for purchase in the manner described herein an aggregate principal amount of Offered Notes such that the total amount payable by TMK (including all amounts payable in respect of accrued interest on Offered Notes accepted for purchase) in respect of (i) Notes validly offered for sale at the Early Offer Purchase Price or the Late Offer Purchase Price (each as defined in the Tender and Consent Memorandum) together with (ii) the payment of the Early Consent Fee and the Late Consent Fee, shall not exceed the Total Invitation Funds Available. Noteholders who validly tender their Notes (and do not validly withdraw or revoke them) on or prior to the Early Tender Deadline of 5pm CET on 21 July 2009, will receive the Early Offer Purchase Price of U.S.$ 90,000 per U.S.$ 100,000 principal amount of Notes (subject to pro-ration in the event that the Maximum Invitation Amount is exceeded) plus the Early Consent Fee. Noteholders who validly tender their Notes after the Early Tender Deadline and on or prior to the Final Instruction Deadline of 5pm CET on 31 July 2009 and did not validly withdraw or revoke these Notes, will receive the Late Offer Purchase Price of U.S.$ 87,000 per U.S.$ 100,000 principal amount of Notes (subject to pro-ration in the event that the Maximum Invitation Amount is exceeded) plus the Late Consent Fee.
The submission of a Tender Instruction by a Noteholder will also represent a vote in favour of the Extraordinary Resolution in respect of the Notes which are the subject of such Tender Instruction.
TMK will, subject to the terms and conditions of the Tender and Consent Memorandum, accept for purchase Notes validly offered for sale at the Early Offer Purchase Price or the Late Offer Purchase Price, as applicable, together with accrued and unpaid interest to (but excluding) the Settlement Date.
It is a condition (waivable by TMK) of TMK's obligation to purchase Notes submitted for tender in respect of Notes subject to a Tender Instruction that the Extraordinary Resolution has been passed at the Meeting.
Pro-Ration
Where Notes are validly offered for sale at the Early Offer Purchase Price or the Late Offer Purchase Price in a nominal amount which (if TMK were to accept all such Offered Notes), when aggregated with the payment of the Early Consent Fee and Late Consent Fee and all amounts payable in connection with accrued interest on such Offered Notes, would result in TMK paying in excess of the Total Invitation Funds Available then TMK will accept Offered Notes in the following order:
Consent Invitation
The Consent Invitation will provide that Noteholders may vote in respect of the Extraordinary Resolution only but without making an offer to sell in respect of all or some only of their Notes by submitting a valid Consent Instruction at any time during the Offer Period.
Subject to the passing of the Extraordinary Resolution, (i) Noteholders who deliver a Consent Instruction in favour of the Extraordinary Resolution (and do not validly withdraw or revoke it) on or prior to the Early Consent Deadline of 5pm CET on 21 July 2009, will receive the Early Consent Fee of U.S.$ 5,000 per U.S.$ 100,000 principal amount of Notes on the Settlement Date and (ii) Noteholders who deliver a Consent Instruction in favour of the Extraordinary Resolution (and do not validly withdraw or revoke it) after the Early Consent Deadline and on or prior to the Final Instruction Deadline of 5pm CET on 31 July 2009, will receive the Late Consent Fee of U.S.$ 3,000 per U.S.$ 100,000 principal amount of Notes on the Settlement Date.
It is a condition (waivable by TMK) of TMK's obligation to pay the Early Consent Fee and the Late Consent Fee, as the case may be, in respect of Notes subject to a Consent Instruction that the Extraordinary Resolution has been passed at the Meeting.
It is a condition to TMK's obligations to purchase Offered Notes and to pay the Early Consent Fee and the Late Consent Fee that the loan from a major Russian bank which is anticipated to form the source of funds required to purchase the Offered Notes be approved at an extraordinary general meeting of TMK's shareholders to be held on 4 August 2009.
Noteholders who submit Consent Instructions after the Early Consent Deadline will not be eligible to receive the Early Consent Fee and Noteholders will not be eligible to receive either the Early Consent Fee or the Late Consent Fee if they vote against the Extraordinary Resolution or if they do not vote at all.
Noteholders may submit either a Tender Instruction or a Consent Instruction, but are not permitted to submit both a Tender Instruction and a Consent Instruction.
For the avoidance of doubt, the payment of the Early Consent Fee as a component of the Early Offer Purchase Price, the Late Consent Fee as a component of the Late Offer Purchase Price and the Early Consent Fee and Late Consent Fee pursuant to the Consent Invitation will not be subject to pro-ration in the circumstances where Notes are validly offered for sale at the Early Offer Purchase Price or the Late Offer Purchase Price in a nominal amount which (if TMK were to accept all such Offered Notes), when aggregated with the payment of the Early Consent Fee and Late Consent Fee and all amounts payable in connection with accrued interest on such Offered Notes, would result in TMK paying in excess of the Total Invitation Funds Available.
Meeting of Noteholders
The Noteholders Meeting shall take place at the offices of Linklaters LLP, One Silk Street, London, EC2Y 8HQ at 5pm CET on 4 August 2009.
Indicative Timetable
| Event | Date |
| Early Tender Deadline / Early Consent Deadline | 21 July 2009, 5pm CET |
| Expiration Date / Final Instruction Deadline | 31 July 2009, 5pm CET |
| Noteholders Meeting | 4 August 2009, 5pm CET |
| Transaction Condition Announcement Date Announcement of Acceptance | 6 August 2009 6 August 2009 |
| Expected Settlement Date | Expected to be no later than the tenthBusiness Day following the announcement of the acceptance of Offered Notes for purchase |
For further information:
A complete description of the terms and conditions of the Proposals will be set out in the Tender and Consent Memorandum. Further details on the transaction can be obtained from:
The Joint Dealer Managers:
| UBS Limited | VTB Capital plc |
| Attn: Mark T Watkins Tel: +44 20 7567 0525 | Attn: George Niedringhaus Tel: +44 20 3334 8333 |
The Tender and Tabulation Agent:
| Lucid Issuer Services Limited |
| Attn: Lee Pellicci Tel: +44 20 7704 0880 tmk@lucid-is.com |
The Joint Dealer Managers take no responsibility for the contents of this announcement. This announcement must be read in conjunction with the Tender and Consent Memorandum. This announcement and the Tender and Consent Memorandum contain important information which should be read carefully before any decision is made in connection with the Proposals. If you are in any doubt as to the action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, accountant or other independent financial adviser.
DISCLAIMER AND INVITATION RESTRICTIONS
This Announcement does not constitute an offer to purchase Notes. This Announcement does not constitute a solicitation of an offer to sell Notes in any jurisdiction in which such solicitation or offer is unlawful, and offers to sell will not be accepted from Noteholders located or resident in any jurisdiction in which such solicitation or offer is unlawful. In those jurisdictions where the securities or other laws require the Invitations to be made by a licensed broker or dealer, any actions in connection with the Invitations shall be deemed to be made on behalf of TMK and the Issuer by the Joint Dealer Managers or one or more registered brokers or dealers licensed under the laws of such jurisdiction.
The distribution of this Announcement in certain jurisdictions is restricted by law. Persons into whose possession this Announcement comes are required by TMK, the Joint Dealer Managers and the Tender and Tabulation Agent to inform themselves about, and to observe, any such restrictions.
This Announcement is only available to relevant persons (as defined below) and the transactions contemplated herein will only be available to, or engaged in only with relevant persons, and this financial promotion must not be relied or acted upon by persons other than relevant persons. Expressions of interest and instructions resulting from this Announcement will only be responded to or accepted if received from relevant persons.
United States
The Tender Invitation is not being made and will not be made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation, facsimile transmission, telex, telephone, email and other forms of electronic transmission) of interstate or foreign commerce of, or any facility of a national securities exchange of, the United States and the Notes may not be tendered in the Tender Invitation by any such use, means, instrumentality or facility from or within the United States or by persons located or resident in the United States. Accordingly, copies of this Announcement, the Tender and Consent Memorandum and any other documents or materials relating to the Tender Invitation are not being, and must not be, directly or indirectly, mailed or otherwise transmitted, distributed or forwarded in or into the United States or to persons located or resident in the United States. Any purported tender of Notes in the Tender Invitation resulting directly or indirectly from a violation of these restrictions will be invalid and tenders of Notes made by a person located or resident in the United States or any agent, fiduciary or other intermediary acting on a non-discretionary basis for a principal located or resident in the United States will not be accepted. For the purposes of this paragraph, United States means the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia.
Italy
The Tender Invitation is not being made in the Republic of Italy. The Tender Invitation, the Tender and Consent Memorandum and this Announcement have not been submitted to the clearance procedure of the Commissione Nazionale per le Società e la Borsa (CONSOB) pursuant to Italian laws and regulations. Accordingly, the Tender Invitation is not made or made available to Noteholders who are Italian residents and/or persons located in the Republic of Italy and they may not submit offers to sell Notes in respect of any Invitation and, as such, any offers to sell received from or on behalf of such Noteholders shall be ineffective and void. Neither this Announcement nor any other solicitation material relating to the Tender Invitation or the Notes may be distributed or made available in the Republic of Italy.
United Kingdom
The communication of this Announcement is not being made, and this Announcement has not been approved, by an authorised person for the purposes of section 21 of the Financial Services and Markets Act 2000. Accordingly, this Announcement is not being distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, the communication of this Announcement as a financial promotion is only being made by TMK or the Joint Dealer Managers to, and is directed only at: (a) persons outside the United Kingdom; (b) those persons falling within the definition of Investment Professionals (contained in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order")), or other persons to whom it may lawfully be communicated in accordance with the Order; or (c) any person to whom it may otherwise lawfully be made (such persons together being "relevant persons").
France
The Tender Invitation is not being made, directly or indirectly, to the public in the Republic of France. Neither this Announcement, the Tender and Consent Memorandum nor any other documents or materials relating to the Tender Invitation have been or will be distributed to the public in France and only (i) providers of investment services relating to portfolio management for the account of third parties and/or (ii) qualified investors (investisseurs qualifiés) other than individuals, all as defined in, and in accordance with, Articles L.411-1, L.411-2 and D.411-1 of the French Code monétaire et financier, are eligible to participate in the Tender Invitation. Neither this Announcement nor the Tender and Consent Memorandum has been or will be submitted to or approved by the Autorité des Marchés Financiers.
Luxembourg
Under no circumstances shall the Tender Invitation constitute an offer to sell or issue, or the solicitation of an offer to buy or subscribe for, Notes in Luxembourg.
General
This Announcement does not constitute an offer to purchase or a solicitation of an offer to sell the Notes, and tenders of Notes in response to the Tender Invitation will not be accepted from Noteholders, in any jurisdiction in which such offer or solicitation is unlawful. In those jurisdictions where the securities, blue sky or other laws require the Invitations to be made by a licensed broker or dealer and the Joint Dealer Manager or an affiliate of the Joint Dealer Manager is such a licensed broker or dealer in such jurisdictions, the Invitations shall be deemed to be made on behalf of the Issuer or TMK (as applicable) by the Joint Dealer Manager or such affiliate and the Invitations are not being made in any such jurisdiction where the Joint Dealer Manager or one of its affiliates is not so licensed.