Restructure Proposal to be put to Creditors of the Pasminco Group - Takeovers Panel Disclosure Requirements

On 30 April 2002 the Administrators of Pasminco Limited (Administrators Appointed) (Pasminco) published a notice about the effect and conditions of the Takeovers Panel`s (Panel) decision made on 22 April 2002 regarding Pasminco.

A condition of the Panel`s decision was that, when the Administrators have a firm proposal that is to be put to the creditors, the Administrators disclose an adequate description of the proposal. The Administrators` proposal is to be put to creditors at the second meeting of creditors convened under s439A of the Corporations Act 2001. The second creditors` meeting has been adjourned to 16 August 2002.

Restructure Proposal and Fallback Options

The proposal to be put to the creditors will be contained in proposed deeds of company arrangement to be tabled before the second creditors` meeting (Deeds). If the creditors resolve that Pasminco and other Pasminco Group companies execute the Deeds, and the Deeds are executed, they will bind the Pasminco Group, the relevant creditors, the Deed Administrators and Pasminco Group officers and Shareholders.

The Deeds will implement a restructure of the Pasminco Group.
The major elements of the proposed restructure include the following:

• The Pasminco Group will be divided into two distinct groups. The groups would comprise:
  
  
  (a) entities required for the ongoing operations (Ongoing Group); and
  
  (b) entities that will not be included in the restructured Pasminco (Residual Group). The Residual Group will be wound up in an orderly manner by the Deed Administrators.
  
  
• A newly formed wholly owned subsidiary of Pasminco (Newco) will:
  
  
  (a) offer fully paid ordinary shares for issue or sale to investors in Australia and overseas. A prospectus lodged with ASIC will be made available when the shares are offered;
  
  (b) depending on whether the outcome of the offer is acceptable to members of a Pricing Committee of creditors established under the Deeds:
  
  (i) Newco, rather than Pasminco, will become the ultimate holding company of the Ongoing Group;
  
  (ii) Newco will be listed on ASX and its shares will be quoted on ASX. It is currently expected that Newco shares would commence trading on ASX in November 2002;
  
  (iii) the Ongoing Group would largely be released from creditors` claims; and
  
  (iv) the proceeds of the offer and shares in Newco provided as consideration for the acquisition of the Ongoing Group would be available to meet the claims of creditors, subject to the claims of certain priority creditors, including the Administrators, the providers of interim financing to the Pasminco Group and employees. The assets of the Residual Group, and the proceeds of the disposal of the Ongoing Group will be operated and realised in the first instance in the interests of creditors.
  
  
  
  
• Pending completion of the offer, the Pasminco Group will enter into appropriate security arrangements to protect the claims and priorities of certain priority creditors. On completion of the offer the Ongoing Group would be released from most, if not all, of these priority claims.

Under this restructure proposal, existing Shareholders will not receive any equity interest in Newco. However, they may be offered a priority allocation in the offer. Shareholders are also unlikely to receive any return of capital from the winding up of the Residual Group because of the large debts owing to creditors.

There is nothing in this restructure option that would of itself allow Shareholders to realise any capital losses on their investment, including for tax purposes. In this case, the Administrators see no potential or other value in Pasminco Shares. Shareholders would only be able to realise a capital loss on their investments, including for tax purposes, when Pasminco itself is wound up. The timing of such a winding up is uncertain and Shareholders should take their own advice on the consequences to them of a winding up.

The Administrators have engaged three investment banks to act as joint lead managers to assist with the possible offer, if the creditors support it. These firms consider that the above restructure is viable.

This option does not contemplate any arrangements between the creditors regarding the disposal of (or restrictions upon the disposal of) shares in Newco. Shares acquired by creditors other than under the prospectus for the offer may be subject to sale and transfer restrictions by virtue of s707 of the Corporations Act.

If the outcome of the offer is not acceptable to the Pricing Committee, the proposed Deeds incorporate certain fallback options, which include the following.

1. The creditors may decide to convert a certain level of their debt to shares in Pasminco under a debt for equity swap. Shares issued to creditors under this option may be subject to certain on-sale restrictions for a period to be determined and restrictions imposed by s707 Corporations Act. The assets of the Pasminco Group and the proceeds of any realisation of assets will be operated and realised in the first instance in the interests of creditors. Existing Shareholders would be unlikely to receive any return of capital because of the large debts owing to the creditors. However, existing Shareholders may be left with a residual holding in Pasminco after the debt for equity swap of, for example, between 1 to 5% on a fully diluted basis. If this were to occur, Shareholders` holdings would be heavily diluted but their shares would not be cancelled. It is unlikely that this option would of itself allow Shareholders to realise any capital losses on their investment, including for taxation purposes. In this case, the Administrators do not see any significant potential or other value in Shareholders` Pasminco Shares.
   
   
2. The Pasminco Group being wound up in an orderly manner under deeds of company arrangement, while it continues to trade under the direction of the Deed Administrators. The assets of the Pasminco Group and the proceeds of the realisation of the assets will be operated and realised in the first instance in the interests of creditors. Existing Shareholders would be unlikely to receive any return of capital because of the large debts owing to the creditors. On the conclusion of the winding up of the Pasminco Group, Pasminco Shares would be cancelled which may allow Shareholders to realise capital losses on their investments, including for taxation purposes. The timing of any winding up of Pasminco is uncertain and Shareholders should take their own advice on the consequences to them of a winding up.
   
   
3. The Pasminco Group being placed into a creditors` voluntary winding up under the Corporations Act, with the assets being sold or shut down as soon as possible. The proceeds of the realisation of the Pasminco Group assets will be realised in the first instance in the interests of creditors. Existing Shareholders would be unlikely to receive any return of capital because of the large debts owing to the creditors. On the conclusion of the winding up of the Pasminco Group, Pasminco Shares would be cancelled which may allow Shareholders to realise capital losses on their investments, including for taxation purposes. The timing of any winding up of Pasminco is uncertain and Shareholders should take their own advice on the consequences to them of a winding up.

If the offer of shares in Newco proceeds:

(a) a prospectus for the offer will be made available when the shares are offered; and

(b) anyone who wants to acquire the shares will need to complete the application form that will be in or will accompany the prospectus.

Click here to download - Restructure Proposal to be Put to Creditors of the Pasminco Group
(58KB PDF File)

Any Pasminco Shareholder who would like a copy of this notice may call Ms Anne Fields on 03 9604 5129 to request a copy. A copy will be provided free of charge.

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