REC proposes new financial restructure

Yesterday, REC bondholders voted down a financial restructuring program, proposed by the REC board. It would’ve seen a partial bond buyback, to the value of NOK1 billion (US$167 million) and the deferral of maturity of the remaining bonds worth NOK1.4 million (US$233 million) until 2017. It also would’ve seen a bank loan mature in 2015, as opposed to 2013.

Given the unsuccessful bid with bondholders, REC has proposed to leave bond repayments as they are and has successfully negotiated for the bank loan’s maturity to be extended by one year, to 2014. The measures also include the issuing of shares worth close to NOK1.5 billion (US$251 million) in the company.

The new financial restructure will now see the average maturity of the credit facilities from between 2.4 and 4 years – in the initial offering rejected by bondholders, to 2.3 to 2.9 years – in the most recent proposal.

REC will see convertible bonds, worth NOK2.4 billion (US$402 million), maturing in 2014, along with another bond issue, worth NOK650 million (US$109 million), and the NOK1.7 billion bank loan (US$285 million). In total, instruments worth NOK4.7 million (US$787 million) will become mature in 2014, while in the initial proposal – rejected by bondholders – only NOK650,000 (US$109 million) million of the bonds would’ve been due in that year.

The key measures, as a part of the refinancing deal, are that the company raises additional funds through the share offering and delay any loan repayments until 2014.

The share offer, which involves a private placement worth NOK1.3 billion (US$218 million) and an additional subsequent offering of NOK375 million (US$63 million), to minority shareholders, remains unchanged.

The two separate share offers have drawn criticism from minority shareholders, who claim that the deal is not equitable. REC spokesman Mikkel Tørud told pv magazine: "there is no doubt that what is proposed is well within the legal framework." He explained that the support of key shareholders has been required as a part of the restructuring arrangements, and that as such the deal has been structured in this way.

In a statement announcing the new offering, REC CEO Ole Enger said that with "revised bank financing now in place" the share offering can be made. "The combination of a solid balance sheet and a strong market and cost position give us financial stability in a situation where our industry is under sever pressure", said Enger.

REC now proposes to hold an extraordinary general meeting on July 27, 2012 to see the move approved by shareholders.