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SRV commences written procedures to amend the terms and conditions of its senior unsecured notes and discloses a tender offer regarding notes

SRV GROUP PLC                        STOCK EXCHANGE RELEASE   28 APRIL 2022  8.20 EET

SRV commences written procedures to amend the terms and conditions of its senior unsecured notes and discloses a tender offer regarding notes

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR TO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.

SRV Group Plc (“SRV” or “Company”) discloses its intention to commence written procedures regarding potential amendments to the terms and conditions of SRV's EUR 100 million unsecured fixed-rate notes due on 23 March 2025, (of which EUR 34.9 million is outstanding), (“EUR 100 million Notes”) and EUR 75 million unsecured fixed-rate notes due on 27 March 2025 (of which EUR 64.9 million is outstanding), (“EUR 75 million Notes” and together with the EUR 100 million Notes “Notes”). At the same time, SRV invites all holders of the Notes to tender their Notes for redemption for cash consideration at a price that corresponds to 60% of the adjusted nominal amount of each Note (the “Tender Price”).

On 28 April 2022, SRV announced that it has initiated a programme with the aim of achieving a full reorganisation of the company’s financing due to Russia’s war in Ukraine and the impairments of its Russian business operations caused by the related financial sanctions. The objective of the reorganisation is to increase equity by approximately EUR 100 million, and at the same time decrease interest-bearing debt by the same amount. The reorganisation of the company’s financing has strong support from SRV’s largest shareholders, bond and hybrid bond holders as well as banks, which is why SRV trusts that the programme will be implemented. Upon completion of the restructuring, SRV will be almost free of net debt (IFRS 16 adjusted) construction company and its Russia related risks will be small. The Company has a good and healthy construction business in Finland.

The measures described above are part of the reorganisation programme which consists of the following measures:

  1. a rights issue for approximately EUR 35 million that is issued to the Company’s current shareholders (the “Subscription Rights Issue”);
  2. the conversion of the Notes into hybrid convertible bonds in written procedure (“Hybrid Conversion”). The conversion into a convertible bond will be executed by amending the terms of the Notes by including in the terms a special right under the Companies Act to convert the Notes into shares. In addition, the holders of the Notes will be given the opportunity to tender their Notes for full or partial redemption at a price that corresponds to 60% of the nominal value of the Notes (the “Tender Offer”);
  3. using the EUR 45 million hybrid bond issued on 22 March 2016 (with an outstanding unpaid principal of EUR 11.8 million) and the EUR 58.4 million hybrid bond issued on 23 May 2019 (with an outstanding unpaid principal of EUR 3.6 million) (the “Hybrid Bonds”) to subscribe the company’s shares for 45% of the Hybrid Bonds’ principal as part of a directed share issue of a maximum of EUR 6.9 million, which will be directed to the holders of the Hybrid Bonds (the “Directed Share Issue”). Altogether 55% of the principal of the Hybrid Bonds and any unpaid interest that has accumulated for the Hybrid Bonds as of the moment of conversion will be cut entirely as part of the arrangement; and
  4. the extension of the liquidity and project financing facility granted to SRV (the “Credit Facility”) by 12 months and the implementation of necessary amendments to the agreement governing the Credit Facility in order to account for the new equity structure and the impact of the company’s Russian business operation in those terms and conditions the fulfilment of which may be affected by the changed circumstances.

Written procedure for converting the Notes into convertible capital notes

In order to implement the programme described above, SRV will initiate written procedures regarding the Notes with the aim of converting the Notes into convertible capital notes (the converted notes referred to as “Instruments” below). The convertibility of the Notes will be ensured by amending the terms and conditions of the Notes to include a special right within the meaning of the Finnish Limited Liability Companies Act to convert Notes into shares.

The written procedures will be commenced under the terms and conditions of the notices of written procedure dated 28 April 2022. The notices are enclosed as appendices to this stock exchange release. The written procedures will be separate for the EUR 100 million Notes and the EUR 75 million Notes.

In the written procedures, SRV proposes to the holders of the Notes that they agree to waive the breach of SRV’s equity ratio covenant that occurred during the reference period that ended on 31 March 2022. In addition, the Company proposes that the terms and conditions of the Notes be specified to state that the equity ratio covenant will not be tested for the period ending on 30 June 2022 and that, going forward, SRV Russia Oy and the direct and indirect subsidiaries owned by SRV and SRV Russia Oy in the Netherlands and in Russia will no longer be counted among material group companies.

In addition, provisions will be added to the terms and conditions of the Notes regarding a procedure for replacing the terms and conditions of the Notes with the new terms and conditions governing the Instruments on the following conditions:

  1. the Hybrid Conversion is implemented simultaneously with regard to both the EUR 75 million Notes and the EUR 100 million Notes;
  2. the Tender Offer process described below for the Notes has been completed;
  3. SRV has completed one or several issues of shares with aggregate gross proceeds of no less than EUR 20,000,000;
  4. SRV’s extraordinary general meeting has resolved on necessary authorisations granting special rights to be included in the terms and conditions of the Instruments;
  5. the holders of the Hybrid Notes have approved amendments to the terms and conditions thereof in written procedures, pursuant to which the holders of the Hybrid Notes may use 45% of the principal of the Hybrid Notes to subscribe SRV’s shares and the non-converted share will be cut in its entirety; and
  6. the lenders of the Company’s Credit Facility have committed to extend the Credit Facility’s termination date until 28 April 2024 (subject to the implementation of the overall reorganisation as described above and customary conditions precedent applied by lenders).

The Instruments in force after the completion of the Hybrid Conversion will constitute the Company’s subordinated, perpetual obligations, and they will be treated in SRV’s accounts as equity instruments in accordance with IFRS standards. The holders of the Instruments will be entitled to use the principal of the Instruments to subscribe SRV’s shares on certain conditions.

The Company has discussed the written procedures primarily with the largest institutional holders of Notes before they were made public, and the Company has received signed voting undertakings in favour of the amendments from investors representing a majority of the outstanding nominal amount in each of the Company’s Notes. In aggregate, the signed voting undertakings represent (i) 51.5% of the principal of the EUR 75 million Notes, and (ii) 60.8% of the principal of the EUR 100 million Notes.

A written procedure referred to in the terms and conditions of the EUR 75 million notes and the EUR 100 million notes is quorate only if noteholders that represent at least 50% of the Adjusted Nominal Amount (as defined in the terms and conditions of the EUR 75 million notes and the EUR 100 million notes) respond in the written procedure. The amendments proposed in the written procedures require the consent of noteholders that represent at least 75 per cent of the Adjusted Nominal Amount (as defined in the terms and conditions of the EUR 75 million notes and the EUR 100 million notes) represented in the written procedure.

In order to be entitled to participate in the applicable written procedures, the participant must be registered as a holder of either the EUR 75 million Notes or the EUR 100 million Notes as at the time when the book-entry securities system of the trading facilities maintained by Euroclear Finland Oy close for the day (“CSD Business Day” as defined in the terms and conditions of the EUR 75 million Notes and the EUR 100 million Notes) on 27 April 2022. The deadline for submitting the appropriate voting form is at 5.00 pm (Finnish time) on 23 May 2022, by which hour the Agent (as defined in the terms and conditions of both the EUR 75 million Notes and the EUR 100 million Notes) must have received the voting form by email, mail or courier.

The holders of the Notes are instructed to carefully read the notices to the written procedures in order to ensure that they are aware of the detailed and full information regarding the proposed amendments and the procedure for participating in the written procedures. The notices are enclosed as appendices to this stock exchange release.

In the event that either the written procedure concerning the EUR 75 million Notes or those pertaining to the EUR 100 million Notes does not approve the proposed amendments, the terms and conditions that govern the EUR 75 million Notes and those governing the EUR 100 million Notes will undergo no changes.

Tender Offer regarding SRV’s outstanding Notes

In connection with the written procedures regarding the amendment of the terms and conditions of the Notes, SRV invites all holders of the Notes to tender their Notes against cash consideration for the Tender Price. Simultaneously, SRV is soliciting consents for the approval of the amendment of the terms and conditions of the Notes (the “Proposal”) in the written procedures described above (the “Consent Solicitation Process”).

The Tender Offer and the Consent Solicitation Process will be implemented while observing the conditions and limitations described in the English-language document titled Consent Solicitation and Tender Offer Memorandum, dated 28 April 2022 (the “Memorandum”). The holders of the Notes are entitled to request a copy of the Memorandum from the Agent (cf. the contact details below).

Accrued and unpaid interest will be paid for Notes that have been tendered and accepted for repurchase in accordance with the Tender Offer.

All holders of the Notes that tender their Notes in accordance with the Tender Offer will be considered to have consented to the Proposal insofar with the Notes held by such holder. As such, the holders of the Notes cannot tender their Notes without simultaneously giving their consent to the Proposal. Noteholders must indicate that they consent to tender the Notes held by such holder by submitting a Voting and Tender Form to the Agent in accordance with the written procedure within the deadline specified above.

The Tender Offer is conditional, without limitation, on the implementation of the measures undertaken to reorganise SRV’s financing as is described in more detail in the Memorandum.

The prior undertakings provided by the major institutional noteholders, which have been described above in respect of the written procedures, also include undertakings to participate in the Tender Offer in the aggregate nominal amount of EUR 24.4 million in total.

SRV has appointed Pareto Securities AB as its financial advisor in the written procedures concerning the Notes.

The holders of the Notes are advised to contact Pareto Securities AB (contact details below) to receive more information about the written procedures regarding the Notes.

Appendices:

Notice of written procedure and Tender Offer regarding the EUR 75 million Notes

Amended terms and conditions of the EUR 75 million Notes

Terms and conditions of the Instruments replacing the EUR 75 million Notes
Notice of written procedure and Tender Offer regarding the EUR 100 million Notes

Amended terms and conditions of the EUR 100 million Notes

Terms and conditions of the Instruments replacing the EUR 100 million Notes

Additional Information:

Jarkko Rantala, CFO, tel. +358 40 674 1949, jarkko.rantala@srv.fi
Ville Takala, CEO, Pareto Securities Oy, tel. +358 50 1745, ville.takala@paretosec.com

Henri Kaasalainen, Nordic Trustee Oy, tel. +358 400 202 474, finland@nordictrustee.com (”Agent”)

Distribution:

Nasdaq Helsinki
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About SRV in short

SRV is a Finnish developer and innovator in the construction industry. We build more sustainable and more responsible urban environment that ensures financial value and the well-being of the environment and residents. We call this approach a lifecycle-wise reality. Our genuine cooperation and enthusiasm for our work comes across in every encounter, and listening is one of the most important ways in which we act. We believe that discussion is the key to change the world.

Our company, established in 1987, is listed on the Helsinki Stock Exchange. We operate in growth centres in Finland. In 2021, our revenue totalled EUR 932.6 million. In addition to about 1,000 SRV employees, we employ a network of around 3,600 subcontractors.

SRV – Building for life

IMPORTANT NOTICE

This release is not an offer for sale of securities the United States. Securities may not be sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of1933, as amended. SRV does not intend to register or to conduct a public offering of securities in the United States.

The distribution of this release may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restrictions. The information contained herein is not for publication or distribution, directly or indirectly, in or into Australia, Canada, Japan or the United States. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This release is not directed to, and is not intended for distribution 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.

In any EEA Member State and in the United Kingdom, this release is only addressed to and is only directed at qualified investors in that Member State or in the United Kingdom within the meaning of Regulation (EU) 2017/1129 (the “Prospectus Regulation”), which forms part of domestic law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018.”

This release is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). Any securities mentioned herein are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this release or any of its contents.

This release does not constitute a prospectus as defined in the Prospectus Regulation and as such, does not constitute or form part of and should not be construed as, an offer to sell, or the solicitation or invitation of any offer to buy, acquire or subscribe for, any securities or an inducement to enter into investment activity.

The amended terms and conditions of the Notes as well as the instructions regarding the Notes are included in full in the notices of the written procedures regarding the Notes that SRV has drafted in connection with the written procedures. The notices of the written procedures are available at SRV’s web site at www.srv.fi/en/investors.

Investors are advised to familiarise themselves with the notice of written procedures and the information presented therein.

No part of this release, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The information contained in this release has not been independently verified. No representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. SRV or any of its respective affiliates, advisors or representatives or any other person, shall have no liability whatsoever (in negligence or otherwise) for any loss however arising from any use of this release or its contents or otherwise arising in connection with this release. Each person must rely on their own examination and analysis of SRV, its subsidiaries, its securities and the transactions, including the merits and risks involved.

Danske Bank and Pareto act exclusively for SRV and no one else. Danske Bank and Pareto do not regard any other person as a respective client in relation to the arrangement. Danske Bank and Pareto will not be responsible to anyone other than SRV for providing the protections afforded to their respective clients nor for giving advice in relation to the arrangement or any transaction or arrangement referred to herein.

This release includes forward-looking statements. These statements may not be based on historical facts but are statements about future expectations. When used in this release, the words “aims,” “anticipates,” “assumes,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “should,” “will,” “would” and similar expressions as they relate to SRV and the transactions identify certain of these forward-looking statements. Other forward-looking statements can be identified in the context in which the statements are made. These forward-looking statements are based on present plans, estimates, projections and expectations and are not guarantees of future performance. They are based on certain expectations, which, even though they seem to be reasonable at present, may turn out to be incorrect. Such forward-looking statements are based on assumptions and are subject to various risks and uncertainties. Readers should not rely on these forward-looking statements Numerous factors may cause the actual results of operations or financial condition of SRV to differ materially from those expressed or implied in the forward-looking statements. SRV or any of its affiliates, advisors or representatives or any other person undertakes no obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this release.

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