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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.
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.
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
ots Originaltext: Teksid Aluminum S.A.R.L S.C.A
Im Internet recherchierbar: http://www.presseportal.ch
For further information please call: Massimiliano Chiara, Finance
Director, at +39-011-979-4889