HKScan Corporation, Stock Exchange Release, Inside Information, 13 December 2022, at 5.01 p.m. EET
Inside information: HKScan commences procedure in writing for temporary waiver of EUR 90 million bond terms
HKScan Corporation (the "Company") announces a procedure in writing in respect of its EUR 90,000,000 senior unsecured fixed-rate notes due 24 March 2025 with ISIN FI4000490990 (the "Notes") regarding a temporary waiver from a covenant under the terms and conditions of the Notes.
As publicly disclosed today on 13 December 2022, the Company has signed an agreement to sell the shares in its Baltic subsidiaries AS HKScan Estonia, AS HKScan Latvia and UAB HKScan Lietuva, together comprising the Business Unit Baltics, to the Estonian AS Maag Grupp (the "Disposal"). The Disposal is expected to result in a write-down of the value of the assets subject to the Disposal, thereby increasing the Company's net gearing.
The Notes are subject to a financial covenant whereby the Company has undertaken to ensure that the ratio of its total net debt to equity (the "Net Gearing Ratio") shall not exceed one hundred and thirty (130) per cent at the end of any financial quarter (the "Net Gearing Covenant"). The Disposal is expected to result in the Net Gearing Ratio temporarily exceeding 130 per cent and, therefore, to lead to non-compliance with the Net Gearing Covenant.
The Company expects the increase in the Net Gearing Ratio to be temporary, as the Net Gearing Ratio is expected to decrease below 130 per cent and below the level of Net Gearing Ratio prior to the write-down resulting from the Disposal once the Disposal is closed. The closing of the Disposal, including receipt of most of the proceeds from the Disposal, is expected to take place in the second half of 2023. The Company expects to utilise proceeds from the Disposal to repay its existing indebtedness, including bank financing provided by Nordea Bank Abp and other lenders to the Company.
To enable the Company to pursue the Disposal without the risk of non-compliance with the Net Gearing Covenant, the Company is therefore initiating a procedure in writing (the "Procedure in Writing") in respect of the Notes to temporarily waive the Net Gearing Covenant as further described below. For the same objective, the Company has also conducted negotiations with its bank lenders and received consents regarding the gearing covenants, or has taken alternative measures mitigating a potential breach thereof, included in the Company's EUR 145 million revolving credit facility, EUR 39.5 million term loan facility agreement and certain export credit agreements, which consents and measures may be subject to certain conditions precedent, including a waiver of the Net Gearing Covenant being granted by the holders of the Notes (the "Noteholders"). A consent solicitation overview further outlining the Disposal is attached to the notice of the Procedure in Writing, which is attached to this stock exchange release.
The Company initiates a Procedure in Writing to propose that the Noteholders resolve to waive, for the duration of the Waiver Period (as defined below), the requirement under Clause 10 (Net Gearing) of the terms and conditions of the Notes that the Company's ratio of total net debt to equity shall not at the end of any financial quarter exceed one hundred and thirty (130) per cent ("Existing Ratio"), provided that: (i) the ratio of total net debt to equity shall not at the end of any financial quarter exceed one hundred and forty-five (145) per cent ("Temporary Ratio") and (ii) if the Company does not comply with the Temporary Ratio, such non-compliance will constitute an event of default under Clause 13 (Events of default) of the terms and conditions of the Notes in the same manner as non-compliance with the Existing Ratio would have constituted (the "Proposal").
Upon expiry of the Waiver Period, the waiver granted by the Noteholders pursuant to the Procedure in Writing shall terminate and all rights and remedies which would have been available to the Noteholders had such waiver not been granted shall immediately become available.
Upon passing of the Proposal, the waiver will be effective immediately from the date of the passing of the Proposal until a) the closing of the Disposal and the Company having utilised all proceeds received at the closing of the Disposal to repay existing indebtedness of the Company without undue delay after the occurrence of the closing of the Disposal, or b) 1 January 2024, whichever is earlier (the "Waiver Period").
In respect of the Procedure in Writing, if the Proposal is duly approved, the Company will pay all Noteholders an amount equal to 0.7 per cent of the principal amount of the Notes held by each Noteholder (the "Approval Fee"). In addition, Noteholders voting in favour of or against the Proposal by submitting a valid vote no later than by 3 p.m. (Finnish time) on 20 December 2022 ("Early Voting Deadline") are eligible to receive an additional early voting fee (the "Early Voting Fee") in an amount corresponding to 0.3 per cent of the principal amount of the Notes voting in favour of or against the Proposal by such Noteholder.
Prior to the announcement of the Procedure in Writing, discussions have been held with certain larger institutional holders which have expressed support for the Proposal through the signing of voting undertakings.
Pursuant to the terms and conditions of the Notes, quorum in respect of the Procedure in Writing only exists if one (1) or more Noteholders holding in aggregate at least fifty (50) per cent of the principal amount of the Notes outstanding provide/provides replies in the Procedure in Writing. Any holdings of the Notes by the Company and any companies belonging to its group are not included in the assessment whether or not a Procedure in Writing shall constitute a quorum.
The Proposal requires the consent by a majority of more than fifty (50) per cent of the votes cast.
To be eligible to participate in the Procedure in Writing a person must be registered as Noteholder on the fifth (5th) Business Day (as defined in the terms and conditions of the Notes) prior to the last day for replies in the Procedure in Writing, i.e., at the end of Business Day on 16 December 2022, on the list of Noteholders maintained by Euroclear Finland Oy as a directly registered owner (in Finnish: omistaja) or nominee (in Finnish: hallintarekisteröinnin hoitaja), and hold any of the principal amount of the Notes on the last day for replies in the Procedure in Writing.
The Company has mandated Nordea Bank Abp as solicitation agent (the "Solicitation Agent") in the Procedure in Writing in respect of its Notes.
The Solicitation Agent must have received all votes by email to the address indicated in the notice of the Procedure in Writing attached to this stock exchange release no later than 3 p.m. (Finnish time) on 23 December 2022. Votes received thereafter may be disregarded.
The Noteholders are advised to carefully read the notice of Procedure in Writing for full details of, and information on, the proposed waiver and the procedures for participating in the Procedure in Writing. The notice of Procedure in Writing is attached to this stock exchange release.
If the Proposal is not duly approved in the Procedure in Writing, the Existing Ratio will continue to be applied under the Net Gearing Covenant.
The Noteholders are encouraged to reach out directly to Nordea Bank Abp acting as the Solicitation Agent (contact details below) for more information regarding the Procedure in Writing in respect of the Notes.
Notice of the Procedure in Writing in respect of the Notes
Juha Ruohola, interim CEO, HKScan Corporation, tel. +358 400 647 160
Jyrki Paappa, CFO, HKScan Corporation, tel. +358 50 556 6512
HKScan Media Service Desk, by e-mail: email@example.com, tel. + 358 10 570 5700
Nordea Bank Abp, by e-mail: NordeaLiabilityManagement@nordea.com, tel. +45 6136 0379