IUSA Announces Offer to Exchange Its Series A And Series B 9% Senior Secured Notes Due 2023 For Series A And Series B 9% Senior Secured Variable Coupon Notes Due 2027

MEXICO CITY--()--Industrias Unidas, S.A. de C.V. (“IUSA” or “the Company”), a Mexican diversified industrial company, today announced that it has commenced an offer to exchange (the “Exchange Offer”) its outstanding Series A and Series B 9% Senior Secured Notes due 2023 (the “Old Notes”) for, respectively, its Series A and Series B 9% Senior Secured Variable Coupon Notes due 2027 (the “New Notes”), subject to certain conditions including the condition that holders of at least 95% in aggregate principal amount of the Old Notes participate in the Exchange Offer, as further described below. The New Notes will have substantially the same covenants and other terms and conditions as the Old Notes and will be secured by the same collateral as the Old Notes upon the repayment in full of such Old Notes, as further described below.

The Exchange Offer is being made only to holders of Old Notes (the “Holders”), pursuant to the Information Memorandum dated November 21, 2019 (the “Exchange Information Memorandum”) which sets forth more fully the terms and conditions of the Exchange Offer. The Exchange Offer for the Old Notes is scheduled to expire at 5:00 p.m., New York City time, on December 20, 2019 (the “Expiration Date”), unless extended by the Company, and settlement will occur as soon as practicable following the Expiration Date.

As more fully described in the Exchange Information Memorandum, for each US$1.00 in principal amount of each series of Old Notes, tendering holders of Old Notes will, on the settlement date for the Exchange Offer, receive New Notes of the corresponding series with a principal amount equal to US$1.00. In addition, tendering holders of Old Notes will, on the Issue Date, receive additional New Notes with a principal amount equal to the amount of interest accrued on the Old Notes from and including April 30, 2019 to but not including the settlement date for the Exchange Offer (the “PIK Payment”). The PIK Payment will be made to tendering holders of Old Notes in lieu of the cash payment of such accrued interest.

No other payments, including in respect of principal, interest (including accrued or default interest other than the PIK Payment as described above) or additional amounts (if any), will be required to be paid to Holders.

The principal objective of the Exchange Offer is to refinance the Old Notes and avoid a potential concurso mercantil proceeding in Mexico. The Company did not pay the accrued interest and principal amortization payment on the Old Notes due October 31, 2019 and does not currently have the means to repay such amounts or the future amounts that will become payable under the Old Notes. The Company believes that it is currently not likely to find a material source of financing to fund the interest and principal payments on the Old Notes. The Company believes that the completion of the Exchange Offer is critical to resolving its constrained liquidity and ensuring its continued viability. The Company also believes that the Exchange Offer would benefit both Holders and the Company by helping the Company to avoid contentious litigation that could cause business disruptions or damage to the overall value of its business.

The Company reserves the right, subject to applicable law, to extend, withdraw or terminate the Exchange Offer, or otherwise amend the terms of the Exchange Offer. If any tendered Old Notes are not accepted for exchange, such Old Notes will be returned without expense to the tendering holder.

The consummation of the Exchange Offer is subject to the conditions set forth in the Exchange Information Memorandum, which the Company may assert or waive in full or in part in its sole discretion, including the condition that at least 95% in aggregate outstanding principal amount of the Old Notes (including any Old Notes which are owned by the Company or its affiliates) be validly tendered and not validly withdrawn on or prior to the Expiration Date. The Company currently believes that it will not have sufficient funding sources to consummate the Exchange Offer and pay off in full the remaining Old Notes if it obtains less than a 95% participation rate, which may result in the Company being placed in concurso mercantil.

The issuance of the New Notes is expected to occur simultaneously with the repayment in full of any Old Notes that are not tendered and exchanged in the Exchange Offer. On the settlement date for the Exchange Offer, the Company will release the liens on the Old Notes collateral and perfect the liens on the New Notes collateral as soon as practicable thereafter.

Interest on the New Notes will accrue from the Issue Date and will be payable on May 31 and November 30 of each year (each, an “Interest Payment Date”), beginning May 31, 2020, provided that, in lieu of the cash payment of the amount of accrued interest payable on May 31, 2020, holders of the New Notes will receive additional New Notes with a principal amount equal to the amount of such accrued interest, together with additional amounts thereon, if any. No subsequent in-kind payment of interest will be permissible under the indenture governing the New Notes.

Interest on the New Notes will accrue at the rate of 9% per annum initially and, so long as no event of default shall have occurred and be continuing under the indenture governing the New Notes at such time, will be subject to adjustment on each Interest Payment Date as determined by reference to the Company’s Consolidated Leverage Ratio (as defined in the Exchange Information Memorandum) in accordance with the following table:

Consolidated Leverage Ratio

Interest Rate

≥ 9.0 to 1

9.00%

< 9.0 and ≥ 8.0 to 1

8.50%

< 8.0 and ≥ 7.0 to 1

8.00%

< 7.0 and ≥ 6.0 to 1

7.50%

< 6.0 and ≥ 5.0 to 1

6.50%

< 5.0 to 1

6.00%

The principal of the New Notes will be amortized in accordance with the following schedule:

Interest Payment Date

Principal Amortization Payment

May 31, 2021

US$5 million

November 30, 2021

US$5 million

May 31, 2022

US$5 million

November 30, 2022

US$5 million

May 31, 2023

US$5 million

November 30, 2023

US$5 million

May 31, 2024

US$5 million

November 30, 2024

US$7 million

May 31, 2025

US$7 million

November 30, 2025

US$7 million

May 31, 2026

US$7 million

November 30, 2026

US$7 million

May 31, 2027

US$7 million

Any principal remaining after all such amortization payments have been made will be payable at maturity.

The complete terms and conditions of the Exchange Offer are described in the Exchange Information Memorandum, copies of which may be obtained by eligible holders by contacting Epiq Corporate Restructuring, the information and exchange agent for the Exchange Offer, at 777 Third Avenue, 12th Floor, New York, New York 10017 Attn: IUSA Processing , +1(646) 282-2500 or (866) 897-6433, tabulation@epiqglobal.com (please reference “IUSA” in the subject line).

The Company intends to rely on Section 3(a)(9) of the U.S. Securities Act of 1933 (the “Securities Act”) to exempt the offering, issuance and distribution of the New Notes and the subsidiary guarantees thereunder pursuant to the Exchange Offer from the registration requirements of the Securities Act and of any state securities or “blue sky” laws.

This announcement is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy the New Notes nor an offer to purchase Old Notes. The Exchange Offer is being made solely by means of the Exchange Information Memorandum and the related Letter of Transmittal.

About IUSA

IUSA is one of Mexico’s largest diversified industrial groups, manufacturing copper-based and electrical products for the housing and electrical power markets primarily in the U.S. and Mexico.

Forward-Looking Statements

This release contains certain forward-looking statements regarding the future events or the future financial performance of IUSA. These statements reflect management's current views with respect to future events or financial performance, and are based on management's current assumptions and information currently available and are not guarantees of the Company's future performance. The timing of certain events and actual results could differ materially from those projected or contemplated by the forward-looking statements due to a number of factors including, but not limited to those inherent to operating in a highly regulated industry, strong competition, commercial and financial execution and economic conditions, among others.

Contacts

Francisco Rodríguez Avendaño
Email: frodriguez@iusa.com.mx
Tel.: 011-5255-5261-8800

Contacts

Francisco Rodríguez Avendaño
Email: frodriguez@iusa.com.mx
Tel.: 011-5255-5261-8800