Northland Has Reached Agreement with Key Stakeholders, Expects to Launch Bond Offering as Part of the Reorganisation
Existing 12.25% bonds and 13% bonds consolidated into one
Existing bonds amended so that they first become second lien bonds, then shareholder approval will be sought for the convertible element
Borrower to be changed to Northland Resources S.A. ("NRSA") from Northland Resources AB
Second Lien bond convertible into equity of NRSA at CAD 0.047 per share
Maturity on October 15, 2020
Interest: 4% per annum with effect from (and including) March 7 2013, payable semi-annually
Will be paid on a PIK basis in 2013, 2014 and 2015 and, thereafter, in cash and/or PIK in accordance with a waterfall structure, which provides for the use of free cash as defined (the "Waterfall"). In any case, payment of interest in cash in 2016 would only be allowed if interest on the First Lien Bonds has been paid in cash
Conversion: Convertible on any interest payment date during the period commencing on their creation until their maturity date
A majority of holders of the Second Lien Bonds will have the power in a bondholders" meeting to force the conversion of all of the Second Lien Bonds
Once two thirds of the Second Lien Bonds have been converted, the remainder will be subject to mandatory conversion
Assuming full conversion, and the exercise of the Warrants, the Second Lien Bonds will be convertible into shares equating to 80.53% of the post-restructuring pro forma equity of NRSA
The Company may trigger a mandatory conversion of all Second Lien Bonds at any time on or after July 16, 2018, in the event of a full refinancing of the First Lien Bonds.
Guarantees: In each case to the maximum extent permitted by law in each jurisdiction, Northland Resources, NRSA, Northland Sweden AB, Northland Logistics AB and Northland Logistics AS.
Security: A second-ranking fixed and floating security package over the same assets securing the First Lien Bonds. The Second Lien Bonds will be subordinated to the First Lien Bonds
Board Representation: Following their creation, the holders of the Second Lien Bonds may vote to propose two candidates as Directors to the Board of Directors of Northland, the appointment of whom will be subject to shareholder approval
Listing: The Issuer will use its reasonable endeavors to maintain the listing and admission of the Second Lien Bonds to trading on the Oslo Børs
Debt Service Account Release of USD 30 million
Approximately USD 33 million currently remains in the Debt Service Accounts (the "DSA") for the bonds. In order to address the Company"s immediate liquidity needs pending the Issuer"s receipt of the other sources of funding pursuant to the Restructuring Proposal, the Company has requested that approximately USD 30 million standing to the credit of the DSA that currently secure the bonds be released from the DSA and made available to the Company immediately after the bondholders" meeting. Thereafter, the DSA will not be replenished and the DSA collateral structure currently benefitting the Bonds will be cancelled.
It is proposed that the remaining USD 3 million released from the DSA and not advanced to the Issuer shall be retained for use by NTM to cover any costs and expenses it may have in connection with the implementation of the Restructuring Proposal (including the Share Pledge Enforcement).
Supplier credit of USD 145 million (USD 114 excluding VAT)
Project team USD/SEK 12
Total uncommitted 55 (4)
Possible costs related to the Reorgansation 10
Additional contingency 11
Total 451 47
Comments to the breakdown of Capex until end 2014:
Incl. USD 10m upgrade of first process line
Additional contingency of USD 11million, equivalent to 13% of uncommitted Capex
Possible costs related to the Reorganisation of USD 10 million
Exchange rates for the committed Capex have not been fixed, and USD amounts are based on the following exchange rates assumptions:
USDSEK: 6.90 (SEK denominated Capex represents 22% of expected Capex)
USDNOK: 5.73 (NOK denominated Capex represents 16% of expected Capex)
FX adjustments for USD/SEK to 6.45 adds USD 7 million of Capex up to year end 2014
Capex excludes rail cars cost of USD 32 million, assumed to be financed on an operating lease for which a term sheet has been provided
Sustaining Capex expected to be about USD 7-10 million p.a. post completion of Sahavaara
Additional Capex in 2015 and 2016 related to the development of Sahavaara mine (including flotation circuit, overburden removal, civil works, crushing station and conveyors and mine equipment) is estimated to be between USD 165-175 million.
Sources and Uses
See below for an updated overview of expected sources and uses from Jan 1, 2013 to end 2014:
Jan 2013 - Dec 2014 Funding Requirements - Pre Financing USDm
Opening Cash at January 1, 2013 54
Capex excl. Contingencies but including Tapuli process line upgrade (477)
Operating Cash Flow & Group Costs 79
Railcar Leases (5)
Funding Need Pre-Adjustments, Contingencies,
Trade Payments & Fees (349)
Adjustments §
FX (USDSEK 6.90 -> 6.45) ¹ (31)
FOB Sales Price Adjustment (USD 130/dmt -> USD 120/dmt) (40)
Funding Need Pre-Contingencies & Trade Credit Payments & Fees (420)
Contingencies §
General Capex contingency (11)
Possible costs related to the Reorganisation (10)
Funding Need Pre-Trade Credit Payments & Fees (441)
Payments to Trade Creditors
Cash Collateral for main suppliers, Letter of Credit (10)
Funding Need Before Fees (451)
Q4 2014 cash flow backed out to arrive at Funding Need at Minimum Cash Point ² (23)
Transaction expenses (16)
Gross Funding Need (at Minimum Cash Point) (490)
DSA Funding to Date 16
Available DSA Release 30
Supplier credit, exclusive VAT ³ 114
Net Funding Need (330)
Cash Funding from New Money (1stlien senior secured bond) 337
Cash cushion 7
Notes to expected sources and uses from Jan 1 2013 to end 2014:
1) USD 14 million upside if USD/SEK rate stays at current level of 6.65
2) Cash flow generated during Q4 2014 (USD 23m of free cash flow (sales less Opex and Capex)
3) Supplier loan breakdown:
USDm§
Parked debt inclusive of VAT 207
Adjustments supplier cost that cannot be deferred -13
Payments to be made to suppliers on claims less than SEK 2.6m -10
Payments to be made up to SEK 2.6m to suppliers with larger claims -6.4
Payments to be made up to SEK 2.6m to main suppliers -2.6
Payment pro rata to all suppliers above SEK 2.6m -30.0
Parked debt inclusive of VAT net of 2013 payments 145
VAT adjustment for payments -31
Parked debt exclusive of VAT for supplier loan 114
Items not included in the sources and uses table above:
USD 50 million Stemcor prepayment facility potential upside
Signed term sheet for a prepayment facility of up to USD 50 million, subject to achieving specified production and delivery milestones
Currently not included in the Sources & Uses
USD 6 million Atlas Copco lease potential upside
Facility in place, draw down has been done during Reorganisation. Available but not included in the Sources & Uses.
USD 35 million Caterpillar Finance lease potential upside
Draw stop. Needs to be reconfirmed after Reorganisation
Currently not included in the Sources & Uses.
USD 22 million ship loader lease potential upside
Signed term sheet in place, awaiting credit committee approval and documentation.
Currently not included in the Sources & Uses
Comments regarding the report from Royal Haskoning DHV available on the Northland website
Royal Haskoning DHV has issued a Technical Report which the Company has made available to the public on its website. The Company wants to make certain comments in order to clarify the numbers reported in the Royal Haskoning DHV report versus the numbers presented in this release.
Capital to end of the project reported as being USD 1,338 million will increase to USD 1,416 million subject to finalizing fixed commercial agreements on previous open book and target cost arrangements. The main updates are:
USD 37 million fixed cost for previous open book arrangements and the Sahavaara delay
USD 10 million capacity upgrade of first processing line
USD 16 million for Sahavaara delay installation and erection
USD 5 million fixed price for main parts of Narvik port construction
USD 4 million related to construction of temporary tailings management facility phase II
Table 4.3 – CAPITAL TO END 2014 on p. 46-47 has since the report was compiled been updated to reflect new commercial agreements being negotiated that will result in fixed contract cost compared to previous open book arrangements.
Additions in Capex and phasing of cash flow differences are in total USD 37 million
USD 10 million investment for the first process line capacity upgrade has also been included in the updated Capex estimate
Details of the USD 47 million total changes are discussed above under "Capex Update"
Issues with Mining equipment available on site but not in production consisting of CAT 6060 excavator and CAT 793F truck that is mentioned in several places within the report has been resolved. The equipment will be in production May 1, 2013.
Reorganisation Process
The Company"s Swedish subsidiaries entered Reorganisation in early February 2013 (Northland Resources AB on February 8, 2013, and Northland Sweden AB and Northland Logistics AB on February 12, 2013). The Norwegian subsidiary Northland Logistics AS is part of the Reorganisation process, although on an informal basis and on and on the same assumptions as applies for the Swedish entities being part the Reorganisation. The Reorganisation process has allowed the Company time to develop a composition proposal for the unsecured creditors of the Swedish subsidiaries. The reorganisation proposal is expected to be distributed to creditors by the Administrator in the week starting May 13, 2013. A request for composition proceedings is expected to be made to the Court in the week starting May 13, 2013, and if adopted, a creditors meeting will be held within 3-5 weeks, in which unsecured creditors will vote on the composition proposal.
The proposal is approved if three-fourths of voting creditors by number and by aggregate claims vote in favor. If the proposal is approved by the requisite majority, it will bind all unsecured creditors of the Swedish subsidiaries. An application to terminate the Reorganisation will be made once the proposal is approved. Depending on the timing of the creditors meeting, the Swedish subsidiaries are expected to emerge from Reorganisation around early July 2013. Creditors not approving the proposal may file complaints with the Court, any such complaints may delay the process above.
The creditors in Norway have accepted the reorganisation plan in bi-lateral agreements.
Timeline
Below is the expected timeline for completion of the restructuring and Northland to emerge from restructuring:
Date Event§
Monday, April 29 Summons to bondholder meeting and public announcement
Friday, May 3 Bondholder meeting, subscription period expected to start, planned release of first portion of USD 30 million DSA funds
Monday, May 6 Invitation to Extraordinary General Meeting of Northland Shareholders
Friday, May 10 Expected closing of subscription period for contemplated bond offering
Friday, May 24 Implementation Date: Funding and Issue of contemplated new first Lien Bond, anticipated amendment of Existing bonds into Second Lien bonds, and expected repayment of the Trade Supplier Liquidity Funding
Friday, May 24 Extraordinary General Meeting of Northland Resources S.A. to seek certain approvals from existing shareholders needed for the Restructuring Proposal.If the EGM cannot be held due to quorum not being achieved, repeat notice to be distributed for an EGM to be held June 28,2013.Dates to be confirmed
Early July Expected emergence from Reorganisation
Monday, July 8 If the Shareholder Approvals were not obtained in the Extraordinary General Meeting, implement the Share Pledge Enforcement
Northland following Reorganisation
Following completion of the expected offerings, the Company expects to be financed until the Kaunisvaara process facility, and the logistics chain from Kaunisvaara to Narvik are completed, and to reach full production of approx. 4 dmtpa of concentrate based on ore from the Tapuli pit during the third quarter 2014 (excluding the capacity increase from the upgrade of the first process line.
The Company would also complete and announce the DFS for Hannukainen and Pellivuoma as soon as reasonably practical.
Both the new issue of First Lien Bonds, and the rollover of existing bonds have an equity element that requires shareholder approval.
Assuming shareholder approvals are forthcoming, all warrants exercised and the second lien bonds are fully converted into equity, the post restructuring pro forma equity of the Company will be held as follows:
InvestorInstrument§No. of shares, m Ownership
Current shareholders Common shares 514.2 5.26%
Current bondholders, Second Lien CB Conversion rights 7,866.9 80.53%
New First lien Subscribers Warrants 1,388.3 14.21%
Total 9,769.4100%
§
The above share count is shown before consolidation of shares, and may be increased by:
Shares corresponding to 5% of fully diluted share capital which can be issued at the discretion of the board
Any warrants in any tap issue of the new First Lien Bond
Any shares issued in the contemplated repair issue
The Company has suggested that a post restructuring repair issue of shares directed at existing shareholders will be carried out for up to approximately USD 25 million.
Based on the Restructuring Plan (and subject to final agreements being reached), four new board members are to be appointed, complemented by three of the existing board members. Thus the Composition of Northlands Board of Directors will be:
Two board members to be nominated by holders of existing bonds
One board member to be nominated by holders of the new senior secured bond
One board member to be nominated by the holder of the Supplier Credit
Three existing board members
In the interim, Mr. Leif Christian Salomonsen and Mr. Runar Nilsen will be appointed as board advisors
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......lasst es uns abwarten, wir können es eh nicht groß ändern.........
