Ferroglobe PLC (NASDAQ: GSM) (the “Company”) announces that it has
reached an agreement in principle on the terms of the financing
proposal, which was previously detailed in the Company’s release on
February 1, 2021, relating to a $100 million capital raise,
consisting of issuances of new debt and equity, and a three-year
extension of its 9.375% Senior Notes due 2022. On March 27, 2021,
the Company entered into a lock-up agreement (the “Lock-Up
Agreement”) with members of an “Ad Hoc Group,” being existing note
holders representing in aggregate approximately 60% of the 2022
Senior Notes, and Tyrus Capital (“Tyrus”) as backstop provider in
respect of a $40 million equity raise forming part of the
transaction.
Details of the transaction and the process for
its implementation are described below. The “Lock-Up Effective
Date” for the purposes of the Lock-Up Agreement is March 28,
2021.
Trading Update
Ferroglobe continues to benefit from an
improving market and overall price recovery. General positive
momentum in the U.S. as well as strengthening European spot prices
across all key product categories since the start of the year, are
supporting higher average realized prices for Q1 2021. In addition
to the market recovery, Ferroglobe is also benefiting from the
global recovery in demand across the chemical, aluminium and steel
sectors, resulting in shipment volumes in-line with our
expectations for the quarter. The improvement in sales is partially
offset by the inflationary impact on some raw materials, but
supports the gradual improvement in margins beginning Q1.
Ferroglobe expects margins to further improve as the Company
continues its implementation of the previously announced
initiatives underlying its strategic plan. As of February 28, 2021,
Ferroglobe’s total cash was $130 million.
Comments
Javier López Madrid, the Executive Chairman of
Ferroglobe, commented: “By entering into this Lock-Up Agreement,
Ferroglobe comes one step closer to completing a comprehensive
financing that will de-risk our balance sheet and bolster the
overall liquidity of the Company. With the extension of the senior
notes, Ferroglobe will address its near-term debt maturities.
Furthermore, through this financing the Company will secure
sufficient cash to deliver on its strategic plan.” Mr. López Madrid
added: “Currently we are seeing strong momentum across all of our
main products. This financing offers the cash and operational
flexibility needed to capitalize on attractive market
opportunities, as well as accelerate our return to profitability
and create value for all stakeholders.”
Marco Levi, Ferroglobe’s Chief Executive
Officer, commented: “This financing is a key milestone for the
successful execution of our strategic plan, particularly for the
initiatives prioritized for this year. By reaching this milestone,
we can operate our business and advance our specific initiatives
with confidence. We thank our financing partners for their support
and trust in management and in the plan to turnaround our
Company.”
Summary of the Transaction
The proposed transaction is described below, in
summary form. Further details are contained in the Exhibit to this
press release.
The transaction involves three,
inter-conditional elements: the raising of $40m of new equity in
the Company, $60m of new bonds and the extension of maturity and
amendment to the terms of the 2022 Senior Notes.
New $40m Equity:
Ferroglobe will be deleveraging its balance
sheet by raising at least $40 million of equity. The precise method
of raising this capital, choice of instrument and issue price will
be determined closer to the transaction completion date, based on
relevant factors at the time and what the Company considers will be
best for its shareholders. It is currently intended that the new
equity raise will be in the form of a pre-emptive rights issue /
share offering available to all shareholders; however, the Company
will consider other transaction forms, if available, if it believes
they would better maximize value for shareholders.
The equity raise is fully backstopped by Tyrus
up to $40m, subject to certain conditions, at an issue price of the
lower of (i) a 40% discount to the volume weighted average closing
price of the ordinary shares over a number of trading days close to
the transaction effective date (adjusted to address any unusual
trading activity), and (ii) the share price offered in the equity
raise by the Company, provided that the total number of shares
issued (after giving effect to any shares issued in the equity
raise) does not exceed the number of shares currently issuable
without triggering pre-emption rights and that are not reserved for
specific purposes.
New $60m Notes:
Ferroglobe will issue $60 million senior secured
notes that will rank super senior to the extended and amended 2022
Senior Notes and will mature on 30 June 2025. The new $60m Notes
will have an annual fixed cash interest rate of 9.000%, and will
benefit from first ranking security over substantially all of the
assets of Ferroglobe and its subsidiaries (the “Group”). All
holders of the 2022 Senior Notes (on a record date) will have the
right to subscribe for new $60m Notes. The new $60m Notes will be
fully backstopped by the members of the Ad Hoc Group.
Amendments to 2022 Senior Notes:
The 2022 Senior Notes will be exchanged at par
for new $350 million of senior secured notes that will mature on 31
December 2025 (the “Reinstated $350m Notes”). The Reinstated $350m
Notes will have an annual fixed cash interest rate of 9.375%, and
will benefit from second ranking security over substantially all of
the assets of the Group.
The exchange will be implemented using either
(i) an exchange offer that will also involve a concurrent
solicitation of consents to amend the terms of any 2022 Senior
Notes to eliminate substantially all of the restrictive covenants,
certain events of default and other related provisions in the
indenture governing the 2022 Senior Notes (the “Exchange Offer and
Covenant Strip”) or (ii) an English law scheme of arrangement (the
“Scheme”).
Summary of the Lock-Up
Agreement
The Lock-Up Agreement binds its parties to
support and implement the transaction described above, subject to
its terms and conditions. Certain key provisions only are described
below, by way of summary.
Holders of 2022 Senior Notes are encouraged to
obtain a full copy of the Lock-Up Agreement from the Information
Agent (as defined below) using the contact details below and to
familiarise themselves with its full terms.
Undertakings
The Lock-Up Agreement contains various
undertakings from each of its parties, including (but not limited
to):
- to take all actions which are
necessary or reasonably desirable to support and facilitate, the
implementation of the transaction with a view to implementing and
consummating the transaction as soon as reasonably practicable and
in any event, by no later than the long-stop date of six months
following the Lock-Up Effective Date (September 28, 2021) (the
“Long-Stop Date”); and
- not to take, encourage, assist or
support, directly or indirectly, any action that is inconsistent
with the transaction and the Lock-Up Agreement or that would, or
could reasonably be expected to, frustrate, delay, impede or
prevent the transaction.
In addition, holders of 2022 Senior Notes that
are parties to the Lock-Up Agreement give additional undertakings,
including (but not limited to):
- not to take enforcement action against the Group; and
- to vote in favour of any Exchange
Offer and Covenant Strip or Scheme (as applicable) needed to effect
the amendments to the 2022 Senior Notes.
Transaction Documents
The Lock-Up Agreement contains term sheets
describing the main terms of the transaction, and gives Ferroglobe,
Tyrus and the Ad Hoc Group the right to negotiate the final forms
of the documents for the transaction, provided that (subject to
certain amendment rights), these are in form and substance
consistent in all material respects with the main terms as set out
in the Lock-Up Agreement.
Amendments
The Lock-Up Agreement contains certain generally
customary amendment rights to its terms and key transaction dates.
Some of these amendment rights require the consent of all, a
majority or a super-majority of holders of the 2022 Senior Notes
that are party to the Lock-Up Agreement, and some are exercisable
by a majority of the Ad Hoc Group.
Termination
The Lock-Up Agreement contains certain generally
customary termination events (some of which are automatic and some
of which are voluntary and exercisable by different parties),
including (but not limited to):
- automatic termination on the
earlier of (i) September 28, 2021 (the Long-Stop Date); (ii) 25
Business Days following the Lock-Up Effective Date (May 5, 2021,
the “Lock-Up Deadline”) if less than 75% by value of the holders of
the 2022 Senior Notes are parties to the Lock-Up Agreement; or
(iii) the closing of the transaction (the “Transaction Effective
Date”);
- material non-compliance with the
terms of the Lock-Up Agreement by certain parties; and
- the failure to achieve certain
milestones by the agreed specified dates.
Fees
Holders of 2022 Senior Notes may become entitled
to certain fees as follows:
- Cash Consent FeesHolders of 2022 Senior Notes may become
entitled to the following at the Transaction Effective Date:1%
Early Cash Consent Fee: each holder of 2022 Senior Notes who: (i)
becomes party to the Lock-Up Agreement; and (ii) holds 2022 Senior
Notes that became locked-up notes within 10 Business Days following
the effective date of the Lock-Up Agreement (the “Consent Fee
Deadline”), will (subject to certain conditions) be entitled to a
cash fee of 1.00% of the aggregate principal amount of their
locked-up notes.0.5% Late Cash Consent Fee: each holder of 2022
Senior Notes who: (i) becomes party to the Lock-Up Agreement; and
(ii) holds 2022 Senior Notes that became locked-up notes after the
Consent Fee Deadline, will (subject to certain conditions) be
entitled to a cash fee of 0.50% of the aggregate principal amount
of those locked-up notes.
- Equity FeesHolders of 2022 Senior
Notes may become entitled to one (but not both) of the following
sets of fees (depending on how the transaction is implemented) at
the Transaction Effective Date.
- Where the transaction is implemented using an Exchange Offer
and Covenant Strip:
- 2% Early Equity Fee: each holder of
2022 Senior Notes who: (i) becomes party to the Lock-Up Agreement;
and (ii) holds 2022 Senior Notes that became locked-up notes on or
before the Consent Fee Deadline, will (subject to certain
conditions) be entitled to its proportional entitlement of a cash
fee in respect of those locked-up notes to be settled as aggregate
2.00% of the post-transaction ordinary shares in Ferroglobe.
- 1.75% Exchange Offer Equity Fee:
each holder of 2022 Senior Notes who provides consent and
participates in the Exchange Offer and Covenant Strip will (subject
to certain conditions) be entitled to its proportional entitlement
of a cash fee to be settled as aggregate 1.75% of the
post-transaction ordinary shares in Ferroglobe.
- Where the transaction is
implemented using a Scheme, 3.75% Scheme Equity Fee: each holder of
2022 Senior Notes will be entitled to its proportional entitlement
of a cash fee to be settled as aggregate 3.75% of the
post-transaction ordinary shares in Ferroglobe.
Next Steps
Ferroglobe has appointed Global Loan Agency
Services Limited as information agent for the transaction (the
“Information Agent”).
Holders of 2022 Senior Notes that have not yet
signed the Lock-Up Agreement may contact the Information Agent at
ProjectFox@glas.agency to access further information relating to
the transaction and for details of how to accede to the Lock-Up
Agreement.
Noteholders may only become eligible for
the 1% Early Cash Consent Fee (or, to the extent the transaction is
implemented using an Exchange Offer and Covenant Strip, the 2%
Early Equity Fee) by signing the Lock-Up Agreement and holding 2022
Senior Notes that became locked-up notes on or prior to the Consent
Fee Deadline of April 13, 2021
About Ferroglobe
Ferroglobe is one of the world’s leading
suppliers of silicon metal, silicon-based and manganese-based
specialty alloys and ferroalloys, serving a customer base across
the globe in dynamic and fast-growing end markets, such as solar,
automotive, consumer products, construction and energy. For more
information, visit http://investor.ferroglobe.com.
Forward-Looking Statements
This release contains “forward-looking
statements” within the meaning of U.S. securities laws.
Forward-looking statements are not historical facts but are based
on certain assumptions of management and describe Ferroglobe’s
future plans, strategies and expectations. Forward-looking
statements often use forward-looking terminology, including words
such as “anticipate”, “believe”, “could”, “estimate”, “expect”,
“forecast”, “guidance”, “intends”, “likely”, “may”, “plan”,
“potential”, “predicts”, “seek”, “will” and words of similar
meaning or the negative thereof.
Forward-looking statements contained in this
press release are based on information currently available to
Ferroglobe and assumptions that management believe to be reasonable
but are inherently uncertain. As a result, Ferroglobe’s actual
results, performance or achievements may differ materially from
those expressed or implied by these forward-looking statements,
which are not guarantees of future performance and involve known
and unknown risks, uncertainties and other factors that are, in
some cases, beyond Ferroglobe’s control.
All information in this press release is as of
the date of its release. Ferroglobe does not undertake any
obligation to update publicly any of the forward-looking statements
contained herein to reflect new information, events or
circumstances arising after the date of this press release. You
should not place undue reliance on any forward-looking statements,
which are made only as of the date of this press release.
No offer
This press release is not an offer to sell or a
solicitation of an offer to buy or exchange or acquire securities
in the United States or in any other jurisdiction. The securities
referenced in this press release may not be offered, sold,
exchanged or delivered in the United States absent registration or
an applicable exemption from the registration requirement under the
U.S. Securities Act of 1933, as amended. This press release is not
directed at, or intended for distribution, publication,
availability to or use by, any person or entity that is a citizen
or resident or located in any locality, state, country or other
jurisdiction, where such distribution, publication, availability or
use would be contrary to law or regulation, or which would require
any registration or licensing within such jurisdiction.
Summary only
This press release is intended as a summary
only, and holders of 2022 Senior Notes should refer to the
additional details of the terms of the New $40 Equity, the New $60m
Notes and the Reinstated $350m Notes set forth in the Exhibit to
this press release, and the detailed terms set out in the Lock-Up
Agreement.
INVESTOR CONTACT:
Gaurav Mehta Executive Vice President - Investor
Relations investor.relations@ferroglobe.com
MEDIA CONTACT:
Cristina Feliu Roig Executive Director –
Communications & Public Affairs
corporate.comms@ferroglobe.com
Exhibit
Significant Terms of the New $40m
Equity
- The Issue Price: The issue price of
new ordinary shares to be issued in the equity raise will be
determined at the sole discretion of Ferroglobe.
- Backstop: The equity raise will be
fully backstopped by Tyrus up to $40m on terms and subject to the
conditions set out in the New Equity Backstop Letter and the
Lock-Up Agreement.
Significant Terms of the New $60m
Notes
- Maturity date: 30 June 2025
- Interest rate: 9.0% per annum
- Timing: The first $40m will be
issued as soon as reasonably practicable, and a further $20m will
be issued as part of the Transaction Effective Date steps in
accordance with the Lock-Up Agreement. All holders of the 2022
Senior Notes (on a record date and including any member of the AHG
that is a holder of 2022 Senior Notes) will have the right to
subscribe for new $60m Notes.
- Repayment premium. A repayment
premium of $17.5m may become payable on the occurrence of certain
redemption or repayment events.
- Call schedule: The redemption price
will be par during the first 15 months (from the Transaction
Effective Date), non-call (subject to make-whole) during the next 9
months, 104.5% during the next 12 months and par thereafter.
- Guarantees: As per the Reinstated
$350m Notes, with any additions to be agreed between Ferroglobe and
the Majority Ad Hoc Group.
- Collateral: Security over the
shares, inventory, receivables and property, plant and equipment
and other assets of the guarantors, as further agreed in the
Lock-Up Agreement.
- Covenants: As per the 2022 Senior
Notes, but to be further restricted as agreed in the Lock-Up
Agreement.
- Intercreditor arrangements:
Customary intercreditor terms with the Reinstated $350m Notes and
any asset-based facilities.
- Backstop: The New $60m Notes will
be fully backstopped by the Ad Hoc Group on terms and subject to
the conditions set out in the New Debt Backstop Letter and the Lock
Up Agreement. The backstop providers will be entitled to a cash fee
equal to 4.0% of that backstop provider’s commitment.
Significant Terms of the Reinstated $350m
Notes
- Maturity date: 31 December
2025
- Interest rate: 9.375% per
annum
- Call schedule: NC1 (subject to
make-whole), and thereafter, the redemption price shall be
104.6875%, 102.34375%, 101% and par (annual step-downs).
- Guarantees: As per the existing
guarantors plus the addition of any new guarantors agreed for the
New $60m Notes.
- Collateral: Security over the
shares, inventory, receivables and property, plant and equipment
and other assets of the guarantors, as further agreed in the
Lock-Up Agreement.
- Covenants: As per the 2022 Senior
Notes, but to be further restricted as agreed in the Lock-Up
Agreement.
- Intercreditor arrangements:
Customary intercreditor terms with the New $60m Notes and any
asset-based facilities.
Other Terms
- Work Fee: the Ad Hoc Group will be
entitled to a work fee equal to aggregate 1.75% of the Existing
$350m Notes ($6.125m).
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