Asia Aluminum Group Announces Proposed Debt Tender Offer As Part Of Capital
Restructuring Plan
HONG KONG, Feb. 13 /PRNewswire-Asia-AsiaNet/ --
Asia Aluminum Holdings Limited ("AAH") and AA Investments Company Limited
("AAI," and together with AAH and their respective subsidiaries, "we") announce
today that we intend to commence a tender offer and consent solicitation (the
"Tender Offer and Consent Solicitation") for:
-- any and all of AAH's outstanding US$450,000,000 8.00% Senior Notes due
2011 (the "AAH Notes");
-- any and all of AAI's outstanding US$355,000,000 12.00% Senior PIK Notes
due 2012 and AAI's outstanding US$180,000,000 14.00% Senior PIK Notes
due 2012 (together, the "PIK Notes") as well as 1,706,987 Warrants
originally issued with the PIK Notes ("Warrants"); and
-- solicitation of consents to a one-time waiver of, and amendments to,
certain of the provisions of, the indentures, as amended and
supplemented, under which the AAH Notes and the PIK Notes were issued.
We expect to offer up to US$275 per US$1,000 principal amount for AAH Notes
and up to US$135 per US$1,000 principal amount of PIK Notes including Warrants.
The AAH Notes and the PIK Notes are listed on the Singapore Exchange
Securities Trading Limited.
Currently, there are US$450,000,000 principal amount of AAH Notes outstanding
and US$727,529,000 principal amount of PIK Notes outstanding (which amount
includes PIK Notes issued as payment-in-kind for interest).
We expect to commence the Tender Offer and Consent Solicitation next week.
Background
Due largely to adverse global macroeconomic conditions, we have experienced
declining revenues and cash flow as well as increasing pressure on available
working capital facilities at a time when we need increased financing to enable
our aluminum rolled products manufacturing facility to begin commercial
production. The deteriorating conditions have adversely affected our business in
various ways, including:
-- a decline of approximately 20% in sales volume for the six months ended
December 31, 2008 as compared to the same period in 2007;
-- higher cost of sales per tonne;
-- increased overall expenses as a result of preparing our aluminum rolled
products manufacturing facility for commercial production;
-- significantly longer accounts receivable days as many of our customers
have also experienced constraints on working capital; and
-- increasing difficulties maintaining sufficient sources of working
capital financing.
AAI's consolidated EBITDA for the year ended June 30, 2008 was HK$1,121.0
million. For the six months ended December 31, 2008, principally as a result of
market conditions, our sales volumes declined by approximately 20%, while our
cost of sales per tonne increased by approximately 29% and our cost structure
overall increased significantly as we continued to prepare our aluminum rolled
products manufacturing facility for commercial production. These figures are
compared to the six months ended December 31, 2007. As a result of these and
other factors, our EBITDA declined significantly for the six months ended
December 31, 2008. We expect our EBITDA will continue to decline unless market
conditions improve significantly, we are able to access sufficient working
capital and we are able to commence commercial production at our aluminum rolled
products manufacturing facility. Maintaining sufficient EBITDA is crucial to
ensure we are able to finance our day-to-day operations, service our aluminum
rolled products expansion project and service our debt.
Although cash generated from our operations and other sources has decreased,
we continue to require substantial capital. As financial institutions tighten
their lending policies, we have not been able to increase our credit facilities
consistent with the expansion of our operations as we have done in past years,
and expect such situation to continue to worsen if we cannot successfully
restructure or refinance our existing indebtedness. Moreover, the commissioning
of our aluminum rolled products manufacturing facility has been delayed for
several months, which in turn has further contracted our working capital due to
our inability to commence production to generate cash from operations.
The Group incurred significant additional indebtedness through the issuance
of the PIK Notes in May 2006 to fund the privatization of Asia Aluminum Holdings
Limited. As of December 31, 2008, AAH's consolidated total liabilities were
HK$12,390.5 million and total borrowings (including bank and other loans, trust
receipt loans and import loans and the AAH Notes) were HK$8,287.4 million. As of
the same date, AAI's consolidated total liabilities were HK$17,737.3 million and
total borrowings (including bank and other loans, trust receipt loans and import
loans, the AAH Notes and the PIK Notes) were HK$14,094.5 million.
Proposed Restructuring
To address this situation, we have been exploring, for several months,
various options to restructure our balance sheet in an attempt to strengthen our
overall capital and working capital position. Unfortunately, other options have
not progressed on the timetable necessary to meet our working capital needs and
strengthen our financial position. As such, our management has prepared the
Tender Offer and Consent Solicitation to restructure our existing indebtedness.
We have also pursued or are pursuing, the following related initiatives:
-- we have received an indication of general support from a local PRC
Municipal Government to assist us with obtaining adequate financing for
the Tender Offer and Consent Solicitation and for our operations;
-- we have received letters of intent from two of our major existing PRC
bank creditors regarding a preliminary agreement to make loans to
refinance our existing indebtedness and to provide us with additional
financing which may increase our total indebtedness up to RMB6.0
billion, provided that we successfully complete the Tender Offer and
Consent Solicitation and satisfy other conditions; and
-- we have been maintaining regular discussions with our non-PRC bank and
trade creditors regarding the renewal and extension of existing credit
facilities.
Completion of the Tender Offer and Consent Solicitation is crucial to our
restructuring efforts and accordingly, our ability to continue as an operating
company. If we fail to consummate the Tender Offer and Consent Solicitation, our
bank creditors may demand immediate repayment of all outstanding amounts and
refuse to approve further drawdowns under our existing working capital
facilities. Without access to sufficient working capital financing, we project
that our revenue and cash generated from operations would be insufficient to fund
expected operating expenses and required capital expenditures, including
commencing commercial production at our aluminum rolled products manufacturing
facility, as well as to service our existing indebtedness.
Our Chairman, Mr. Kwong Wui Chun, has been making plans to use his equity
interest in AAI to support our restructuring efforts. In consideration for a
local Municipal Government's support for our restructuring, Mr. Kwong has been in
discussions with the government with respect to the transfer of 25.0% of AAI's
equity owned by him to an entity controlled by the government upon the completion
of our restructuring. In addition, we expect Mr. Kwong to transfer an additional
28.4% of AAI's equity to an escrow account following the completion of the Tender
Offer and Consent Solicitation: (i) up to 10.0% of AAI's equity for the benefit
of management and employees (excluding Mr. Kwong) to encourage their continuing
services to us, subject to certain performance thresholds; and (ii) the remainder
to be reserved for subsequent private or public sale to one or more equity
investors, which proceeds are expected to be used to reduce our indebtedness
other than any debt owed to Mr. Kwong. We also expect Mr. Kwong to transfer an
additional 14.0% of AAI's equity to OK Spring Roll Limited Partnership, an entity
owned by a three-member consortium led by ORIX Corporation ("OK Spring Roll"), in
exchange for OK Spring Roll's existing 25.01% equity interest in one of our
subsidiaries following the completion of the Tender Offer and Consent
Solicitation. Upon completion of the Tender Offer and Consent Solicitation, and
simultaneous closing of the transactions described above, we anticipate Mr.
Kwong's equity ownership in AAI will be 30.0%, representing the minimum level
required under the Indentures and certain loan facilities to avoid triggering a
"Change of Control" and representing a significant decrease from his current
equity ownership position. Further, the shareholder loan of approximately
US$61.2 million granted by Mr. Kwong to AAI in connection with AAH's
privatization in May 2006 will be cancelled upon the completion of the Tender
Offer and Consent Solicitation and the transactions described above.
Forward-looking Statements
This press release includes "forward-looking statements" within the meaning
of securities laws of applicable jurisdictions. Forward-looking statements can
generally be identified by the use of forward-looking words such as "may,"
"will," "expect," "intend," "plan," "estimate," "anticipate," "believe," or other
similar words, and include statements regarding certain plans, strategies and
objectives of management and expected financial performance. These forward-
looking statements involve known and unknown risks, uncertainties and other
factors, many of which are outside the control of us and our officers, employees,
agents or associates, including, but not limited to, the competitive markets for
the provision of aluminum products; general political and economic conditions,
including those related to the PRC; cost and availability of financing; our
ability to meet debt and other obligations when due; trends in the aluminum
industry; our ability to commence commercial production of our aluminum rolled
products manufacturing facility; regulations and restrictions; and governmental
approval processes. Actual results, performance or achievements may vary
materially from any projections and forward-looking statements and the
assumptions on which those statements are based. In addition, forward-looking
statements in this press release, including those statements relating to the
Tender Offer and Consent Solicitation, are based on current expectations. Actual
events and results could vary materially from the description contained herein
due to many factors including changes in the market and prices for the AAH Notes,
the PIK Notes and the Warrants; changes in our business and financial condition;
changes in the debt markets in general; and the occurrence of other events that
may trigger a condition permitting termination or amendment of the Tender Offer
and Consent Solicitation. You are cautioned not to place undue reliance on
forward-looking statements. We assume no obligation to update such information.
Contact:
Jenny Lee or Teresa Cheng
t6.communications limited
Tel: +852-2511-8388
Fax: +852-2511-8238
Email: aahenquiry@t6pr.com
SOURCE Asia Aluminum Holdings Limited
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