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Teksid Aluminum S.A.R.L.S.C.A

TK Aluminum Ltd. Announces an Update on Liquidity Situation; Reports Failure to Comply With Certain Financial Covenants, Non-Payment of Senior Note Interest, and Continued Discussions Regarding Additional Liquidity Resources

Carmagnola, Italy (ots/PRNewswire)

TK Aluminum Ltd., the
indirect parent of Teksid Aluminum Luxembourg S.à r.l., S.C.A., today
announced an update on the liquidity situation, failure to comply
with certain financial covenants, continued discussions regarding
additional liquidity resources and non-payment of Senior Note
interest.
The Company's efforts to secure a bridge loan as previously
announced are continuing and it has executed a commitment letter,
subject to certain conditions, with one source. In addition to the
Nemak transaction, negotiations for the sale of the assets located in
France, Germany and Italy are progressing.
Liquidity and Covenants Compliance
The Company announced today that both its senior and second lien
lenders have expressed their support for a waiver of the previously
announced defaults of certain non-financial covenants under the
Senior Credit Facility and Second Lien Credit Facility. However, the
Company will not be in compliance with certain financial covenants
under its Senior Credit Facility and its Second Lien Credit Facility
for the period ended December 31, 2006. As a result, any available
borrowings under the Senior Credit Facility will not be permitted
without agreement from its lenders. In addition, the Senior and,
subject to certain limitations, Second Lien lenders have the ability
to exercise all of their rights thereunder, including requiring the
amounts outstanding under the Senior Credit Facility and Second Lien
Credit Facility to become due and payable. The Company is in
discussions with the lenders' agents to obtain waivers of such
defaults with a view to allowing it to complete the divestiture
process.
To improve its near term liquidity the Company is exploring a
variety of options. Management has obtained favorable terms from key
customers that include, among others, accelerated payment terms and
letters of credit to secure its aluminum requirements. In addition,
the Company has made progress in securing a bridge loan and has
executed a commitment letter for bridge financing, subject to certain
conditions, with one source. The Company has also approached the
agent for its existing lenders to discuss the possibility of a bridge
loan. The Company has and continues to pay suppliers, factors and
vendors in the ordinary course of business, consistent with past
practices.
There can be no assurance that the Company will ultimately be
successful in obtaining additional capital resources or that the
Nemak transaction will be consummated within the time period
necessary to provide the Company with sufficient liquidity to fund
operations, or at all.
Interest Payment on Senior Notes
In balancing its operating cash requirements, the Company will not
make the EUR14.9 million payment of interest due on January 15, 2007
on its outstanding EUR240 million of 11 3/8% Senior Notes due 2011
(the "Senior Notes").
Under the indenture, bondholders will be unable to declare an
event of default and accelerate the maturity of the Senior Notes
unless the non-payment of interest continues following the expiration
of a 30-day grace period or, during such period, the lenders under
the Senior Credit Facility or the Second Lien Facility accelerate the
maturity of their loans. However, other remedies may be available.
Divestiture Process
As previously announced, on November 2, 2006, the Company had
entered into a definitive agreement to sell certain assets to
Tenedora Nemak, S.A. de C.V., a subsidiary of ALFA, S.A.B. de C.V.
Under the terms of the agreement, the Company is to sell its
operations in North America (except for its lost-foam operations in
Alabama, which will be retained by the Company), and its operations
and interests in South America, China and Poland. As consideration
for the operations being purchased, the Company will receive $495.9
million in cash, along with a synthetic equity interest in the Nemak
business post-closing. The transaction, which is expected to close
during the first quarter of 2007, has been approved by both the board
of directors of TK Aluminum Ltd. and by Nemak. Closing of the deal is
subject to various conditions, including the receipt by seller of
certain consents and waivers from the Company's bondholders and other
customary conditions, including regulatory approvals. On November 30,
2006, the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act was terminated in respect of the sale of the assets
in the United States.
As reported on December 13, 2006, the Company executed a
non-binding letter of intent to sell to one or more affiliates of
BAVARIA Industriekapital AG all of the Company's equity interests in
its subsidiaries located in France, Italy and Germany. The
consummation of the transaction is subject to a number of conditions,
including execution of a definitive agreement, regulatory approvals,
completion of satisfactory due diligence, and approval by the board
of directors of the Company of the definitive agreement and all
transactions contemplated thereby.
Tender Offer
The Company is currently examining its options with respect to the
terms of the tender offer for the Senior Notes and related consent
solicitation and intends to recommence the offer on terms and
conditions to be determined. A variety of factors, including the
deterioration of the automotive market, unfavorable foreign exchange
movements, longer lead time to closure of the Nemak transaction and
working capital and other funding requirements for remaining European
operations, have adversely affected the amount of funds available for
the repurchase of our Senior Notes which was contemplated at the time
of the announcement of the Nemak transaction. Accordingly, the
Company expects that the amount available for any such repurchase
will represent a significant discount from par.
This press release does not constitute an offer to buy or a
solicitation of an offer to sell any Senior Notes.
About Teksid Aluminum
Teksid Aluminum is a leading independent manufacturer of aluminum
engine castings for the automotive industry. Our principal products
are cylinder heads, engine blocks, transmission housings and
suspension components. We operate 15 manufacturing facilities in
Europe, North America, South America and Asia. Information about
Teksid Aluminum is available on our website at
www.teksidaluminum.com.
Until September 2002, Teksid Aluminum was a division of Teksid
S.p.A., which was owned by Fiat. Through a series of transactions
completed between September 30, 2002 and November 22, 2002, Teksid
S.p.A. sold its aluminum foundry business to a consortium of
investment funds led by equity investors that include affiliates of
each of Questor Management Company, LLC, JPMorgan Partners, Private
Equity Partners SGR SpA and AIG Global Investment Corp. As a result
of the sale, Teksid Aluminum is owned by its equity investors through
TK Aluminum Ltd., a Bermuda holding company.
For further information please call:
Massimiliano Chiara, Finance Director, at +39-011-979-4889

Contact:

For further information please call: Massimiliano Chiara, Finance
Director, at +39-011-979-4889

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