Globe Newswire
Vallourec reaches a major step with an agreement in principle on financial restructuring with main creditors
VALLOUREC
Updated Wed, 3 February 2021, 11:02 am·25-min read
Vallourec reaches a major step with an agreement in principle on financial restructuring with main creditors
Boulogne-Billancourt (France), February 3, 2021 – Vallourec announces that it has reached a major step in its financial restructuring, with an agreement in principle (“
Agreement in Principle”) with its main creditors. This agreement meets the Company’s objectives to rebalance its capital structure by reducing its debt and securing the necessary liquidity that will enable the Company to implement its strategic plan in a volatile market environment.
The Agreement in Principle has been entered into by the Company and a group of lenders representing together 65.1% of the total amount of the Company’s financial debt, including, on the one hand, certain of its commercial banks1 (the “
Commercial Banks”) representing 38.8% of the principal amount of the revolving credit facilities (“
RCF”) and, on the other hand, investment funds2 holding the 2022 Senior Notes, the 2023 Senior Notes, the 2022 OCEANE, the 2024 Bonds or interests in the RCF (the “
Ad Hoc Group”) representing approximately 50.5% of the principal amount of the RCF3 and 41.4% of the principal amount of the bonds issued by the Company (the “
Bonds”). The Agreement in Principle has been approved unanimously by the members of the Company’s supervisory board. In addition, Bpifrance Participations and Nippon Steel Corporation, the reference shareholders of the Company have confirmed their support for this Agreement in Principle.
In this context, the Company has filed a request with the Commercial Court of Nanterre (
Tribunal de Commerce de Nanterre) for the opening of a safeguard proceedings (
procédure de sauvegarde) with respect to it. The opening of the proceedings notably aims at allowing the implementation of the Agreement in Principle, which will be subject, among others, to the approval by a two-thirds majority of each of the creditors’ committees (lenders under the RCF on the one hand and holders of the Bonds on the other hand), as well as the approval of the extraordinary general meeting of the shareholders, before it can be submitted to the court for approval.
The Agreement in Principle, the terms of which are further described below, contemplates mainly:
- a major deleveraging of Vallourec, representing approximately EUR1,800 million, which is more than half of the principal amount of its debt, through:
- EUR300 million rights issue for the benefit of Vallourec shareholders, fully backstopped by certain creditors under the RCF and the Bonds, the proceeds of which will be used to partially repay their claims;
- the equitization of the claims under the RCF and the Bonds in the amount of approximately EUR1,331 million; and
- a debt write-off granted by the Commercial Banks in the amount of EUR169 million, combined with a better fortunes instrument (instrument de retour à meilleure fortune) in the form of warrants (bons de souscription d’actions),
- the refinancing of the residual debt and the securing of significant liquidity and operational financing through:
- a revolving credit facility of EUR462 million by the Commercial Banks, together with a new senior notes issuance of EUR1,023 million subscribed by the other creditors of the Company (by way of set off of claims), over a period of 5 years;
- a State-guaranteed loan (prêt garanti par l’Etat) in the amount of EUR262 million by the Commercial Banks; and
- bonding lines of EUR178 million provided by the Commercial Banks over a 5-year horizon,
- interest accrued on the RCF and the Bonds up to February 1, 2021 will be paid in cash on the completion date of the financial restructuring (the “Completion Date”); interest which will accrue from February 2, 2021 until June 30, 2021 on the RCF and the Bonds (the “Restructured Interest”) will be partly reimbursed, partly converted into capital and partly refinanced and included in the above-mentioned amounts of debt and equitization.
The Agreement in Principle would enable the Company to consolidate its balance sheet and reduce its debt and interest expenses to a suitable level that takes into account the consequences and uncertainties related to the Covid and oil markets crisis. This new favorable framework, combined with the strong structural measures initiated during financial year 2020, would enable the Company to implement its strategic plan to strengthen its market position.
Apollo, holding between 23.2% and 29.3% of the share capital, and SVPGlobal, holding between 9.7% and 12.3% of the share capital (in each case, before exercise of the warrants), would become the two largest shareholders of the Company.
Edouard Guinotte, chairman of the management board of Vallourec, declared:
“
Vallourec has reached a major step in its financial restructuring process and is pleased to have obtained the agreement of its reference shareholders and main creditors on a financial restructuring plan that meets its objectives of substantially reducing its debt and securing its liquidity. Although our markets remain volatile and their evolution uncertain, this financial restructuring will complement our transformation plan and will enable the Group to roll out its strategic roadmap. I would like to thank all of our stakeholders whose support and cooperation have enabled us to achieve this new step.
The implementation of this plan, expected at the end of the first semester, after obtaining the required approvals, will result in the entry of two new reference shareholders, Apollo and SVPGlobal. They will bring their in-depth knowledge of our markets, their expertise, and their investment reflects their confidence in the strategy implemented by the Group, for which I am thankful.
I would finally like to thank all our clients and partners for their lasting trust in this unprecedented context, as well as our teams, in all our regions, for their continued and exemplary commitment and determination.”
Status of the financial restructuring process
On September 1st, 2020, Vallourec S.A. (“
Vallourec” or the “
Company”) announced its intention to initiate discussions with a view to achieving a financial restructuring and to seek the requisite consents of the relevant groups of creditors (in particular the holders of the 2022 Senior Notes and the 2023 Senior Notes as well as its lenders under the RCF) for the appointment of a
mandataire ad hoc. Following the receipt of these consents, a
mandataire ad hoc was appointed on September 23, 2020 by the President of the Commercial Court of Nanterre (
Président du Tribunal de Commerce de Nanterre), with the duty to assist the Company in its negotiations with its creditors and shareholders in order to reach a financial restructuring plan. In the meantime, an
ad hoc committee (c
omité ad hoc), composed of a majority of independent members of the supervisory board, was put in place to follow up on the discussions related to the financial restructuring.
The negotiations engaged under the aegis of the
mandataire ad hoc with some of the main creditors (with respect to the RCF and the Bonds) and their respective counsels led to the Agreement in Principle. The Agreement in Principle is supported by (i) the Company, (ii) the Commercial Banks representing approximately 38.8% of the total RCF principal amount and (iii) the Ad Hoc Group representing approximately 50.5% of the total RCF principal amount4 and 41.4% of the total principal amount of the Bonds of the Company.
To that effect, the Commercial Banks, the members of the Ad Hoc Group and the Company entered into a lock-up agreement pursuant to which the parties committed to support and take all steps and actions reasonably necessary to implement and consummate the Agreement in Principle. The terms and conditions of the lock-up agreement are relatively customary and include a requirement for creditors to give relevant vote instructions in favor of the implementation of the Agreement in Principle, to provide various waivers, to enter into the required documentation to effect the restructuring plan and not to dispose of their claims unless the transferee accedes to the lock-up agreement or is already a signatory (and is therefore already bound by such terms). The Commercial Banks, Apollo and SVPGlobal undertook not to dispose of their RCF holdings5 and Bonds, including to a signatory or a person who would accede to the lock-up agreement, until the Completion Date.
The Agreement in Principle will be implemented under safeguard proceedings whose opening request has been filed with the Commercial Court of Nanterre. The Agreement in Principle is detailed in
Appendix 1 and comprises the following key elements:
1. Treatment of the claims held by the Commercial Banks under the RCF
The Commercial Banks are expected to:
- grant Vallourec a State-guaranteed loan (prêt garanti par l’Etat) for a total principal amount of EUR262 million; and
- provide notably Vallourec Tubes6 market bonding lines (in particular bid bonds and performance bonds) in the total amount of EUR178 million, for a period of five years (remunerated at 1% per annum for those with a term not exceeding one year and 1.2% for those with a term of one to two years).
In consideration of these commitments and in light of the historical relationships of the Commercial Banks with the Group, the amount of their claims under the RCF (in principal and Restructured Interest) will be treated differently from the amount of the claims with respect to the RCF and the Bonds held by other creditors, and will be subject to the following treatment:
- partial repayment of the claims of the Commercial Banks under the RCF up to their share in the amount of EUR262 million in proportion of their claims under the RCF in relation to the total amount of claims under the RCF and the Bonds (in principal and Restructured Interest);
- refinancing in the amount of EUR462 million through a revolving credit facility (unsecured) granted for the same amount by the Commercial Banks to the Company for a period of five years and bearing an annual interest rate of Euribor +5.00%; this revolving credit facility will be subject to a financial gearing covenant that will be tested for the first time on December 31, 2023;
- debt write-off (the “Debt Write-Off”) by the Commercial Banks with respect to the RCF for the balance of their claims under the RCF, i.e. an amount of EUR169 million; and
- in consideration of the Debt Write-Off, issuance to the benefit of the Commercial Banks of a better fortunes instrument in the form of warrants (bons de souscription d’actions), in proportion to the claims under the RCF held by each of the Commercial Banks (the “Warrants”) entitling them to subscribe to 11.7% of the share capital (on a fully diluted basis) at the exercise price of EUR10.11 per share of the Company (representing a premium of 25 % over the subscription price of the Reserved Capital Increase). The exercise period of the Warrants will be five years from the Completion Date (one Warrants giving right to one new share). The Warrants will be listed on the Euronext Paris market.
- Treatment of the claims in principal and Restructured Interest under the RCF (other than those of the Commercial Banks) and with respect to the Bonds (les “Other Claims”)
