Thames Water Utilities Cayman Fin. Consent Solicitation (3908P)

TIDM38DO TIDMTTM

RNS Number : 3908P

Thames Water Utilities Cayman Fin.

16 November 2016

THAMES WATER UTILITIES CAYMAN FINANCE LIMITED ANNOUNCES CONSENT SOLICITATION

16 November 2016

Overview

Thames Water Utilities Cayman Finance Limited (the "Issuer") today announced a consent solicitation in respect of the GBP400,000,000 7.241 per cent. Guaranteed Class A Unwrapped Puttable Callable Reset Bonds due 2058 (XS0356007012) issued by the Issuer and unconditionally and irrevocably guaranteed by Thames Water Utilities Limited, Thames Water Utilities Holdings Limited, Thames Water Utilities Finance Limited and Thames Water Utilities Cayman Finance Holdings Limited, issued under the Issuer's GBP10,000,000,000 Multicurrency programme for the issuance of Guaranteed Wrapped Bonds unconditionally and irrevocably guaranteed as to scheduled payments of principal and interest pursuant to financial guarantees issued by a Relevant Financial Guarantor and Guaranteed Unwrapped Bonds financing Thames Water Utilities Limited (the "Bonds").

Capitalised terms used in this announcement and not defined herein shall have the meanings ascribed to them in the Solicitation Memorandum dated 16 November 2016 (the "Solicitation Memorandum").

Meeting of Bondholders

A meeting of Bondholders in respect of the Bonds to consider, and if thought fit, pass the Extraordinary Resolution to approve the Proposals and their implementation, shall take place at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ at 9:00 a.m. (London time) on 8 December 2016.

Bondholders who do not wish to attend the Meeting but who wish to vote must take action on or prior to 4:00 p.m. (London time) on 5 December 2016 (the "Expiration Time"), subject to amendment, extension or termination by the Issuer and any earlier deadlines set by any intermediary through which such Bondholders hold their Bonds.

Background to the Proposals

The proposals set out below form part of a broader strategy by the Issuer to manage its refinancing risk in respect of the Bonds, which are subject to an interest rate reset mechanism on 9 April 2018 (the "Reset/Put Date"), as further described below.

Under their current terms, the Bonds accrue a fixed interest rate of 7.241 per cent. per annum until the Reset/Put Date. On and from the Reset/Put Date, if certain conditions are satisfied, the interest rate on the Bonds may be reset and the Bonds acquired from the Bondholders and remarketed to new investors. In the event that the relevant conditions are not satisfied, the Bonds will be subject to the deemed exercise of an Investor Put Option (as further described in the Final Terms), following which the Issuer shall be required to redeem all Bonds in full in accordance with the Final Terms.

The Bonds are further subject to an Assignable Call Option (as further described in the Final Terms and the First Supplemental Bond Trust Deed) which grants to the option holder the right to acquire all of the Bonds in accordance with the terms of that Assignable Call Option. Exercise of the Assignable Call Option is one of the conditions to interest rate reset on the Bonds. The interest reset procedure is described in paragraph 16 of the Final Terms.

The initial holder of the Assignable Call Option is TWUL. TWUL has granted two options (the "Low Strike Call Options") to Morgan Stanley and RBS which grant to the option holders the right to take an assignment of the Assignable Call Option.

In order to increase the flexibility of the timing of the interest rate reset procedure, the Issuer proposes to amend the terms of the Bonds so as to grant to Morgan Stanley (being one of the holders of the Low Strike Call Option) an Investor Call Option (as further described in the Consent Solicitation Memorandum). The Investor Call Option shall grant to the option holder the right to acquire, prior to the Reset/Put Date, all of the Bonds at the Investor Call Option Purchase Price (as defined below). The Investor Call Option Purchase Price is intended to compensate Bondholders for their foregone return on the Bonds for the period from settlement of the Investor Call Option to the Reset/Put Date.

Morgan Stanley is not required to exercise the Investor Call Option. However, if the Investor Call Option is exercised, the Issuer and Morgan Stanley may enter into one or more transactions which are intended to have the economic effect of applying a pre-agreed rate of interest to the Bonds on and from the Reset/Put Date. The potential transactions entered into by the Issuer and Morgan Stanley may include a par-for-par exchange of the Bonds for new GBP bonds issued by the Issuer which will accrue a pre-agreed rate of interest (expected to be similar to the rate of interest on the Bonds) until maturity on 9 April 2058.

If the Consent Solicitation is approved, the Issuer proposes to add the Investor Call Option to the Final Terms and the Conditions. The Investor Call Option will be in favour of Morgan Stanley and will be exercisable by the payment of the Investor Call Option Purchase Price. A Second Supplemental Bond Trust Deed and a Second Supplemental Agency Agreement will also be executed to set out the mechanics for exercise and settlement of the Investor Call Option. Investor Call Option Purchase Price

The "Investor Call Option Purchase Price" means in respect of each GBP100 of nominal value of Bonds, a price determined by a financial adviser in London (selected by the Issuer acting in consultation with Morgan Stanley & Co. International plc (the "Investor Call Option Holder")) on the Investor Call Option Pricing Date which is equal to the greater of GBP100 and the sum of A + B where:

A = 107.241 / (1 + Y)(D1 / 365)

and

B = 7.241 / (1+Y)(D2 / 365)

if the Investor Call Option Settlement Date occurs prior to the Interest Payment Date falling in 2017, or otherwise,

B = 0

where,

D1 = the number of days between the Investor Call Option Settlement Date and the Reset / Put Date

D2 = the number of days between the Investor Call Option Settlement Date and the Interest Payment Date falling in 2017

X = the Reference Yield on the Reference Gilt at or around 1.00 pm (London time) on the Investor Call Option Pricing Date

Y = (1 + X / 2)(2)

For the avoidance of doubt, the Investor Call Option Purchase Price calculated as set out above includes an amount equal to accrued but unpaid interest up to but excluding the Investor Call Option Settlement Date.

The following definitions shall apply:

"Investor Call Option Exercise Date" means the date on which the Investor Call Option Holder gives notice to the Bond Trustee, the Issuer and the Principal Paying Agent in accordance with Clause 3.1.1 of the Second Supplemental Bond Trust Deed of the exercise of the Investor Call Option, which may occur at any time up to (and including) the day which is 7 Business Days prior to the Reset/Put Date;

"Investor Call Option Pricing Date" means the date which is 5 Business Days following the Investor Call Option Exercise Date;

"Investor Call Option Settlement Date" means the date which is 7 Business Days following the Investor Call Option Exercise Date;

"Reference Gilt" means UKT 5 03/07/18, or where the financial adviser advises the Issuer that, for reasons of illiquidity or otherwise, such stock is not appropriate for such purposes, such substitute as may be selected by the Issuer acting in consultation with the Investor Call Option Holder; and

"Reference Yield" means the yield expressed as a percentage and calculated on a basis consistent with the basis indicated by the United Kingdom Debt Management Office publication "Formulae for Calculating Gilt Prices from Yields" published 8 June 1998 with effect from 1 November 1998 (as updated, supplemented, amended or replaced from time to time) page 5 or any replacement thereof.

Further detail on the Proposals is set out below and in the Solicitation Memorandum.

Priority Allocation in the New 2058 Bonds

If the Consent Solicitation is approved and the Issuer and Morgan Stanley decide to proceed with the issuance of the New 2058 Bonds, then a Bondholder that submits an Electronic Voting Instruction voting in favour of the Proposals and wishes to subscribe for New 2058 Bonds can receive priority in the allocation of such bonds (the "Priority Allocation"). The Priority Allocation will be on the terms set out below.

Under the Priority Allocation, priority will be given to any Bondholder that submits an Electronic Voting Instruction voting in favour of the Proposals for a cash value of the New 2058 Bonds not exceeding the aggregate principal amount of the Bonds in respect of which the Electronic Voting Instruction was submitted by the Bondholder (the "Priority Allocation Amount") and will be given in preference to any other investor who is applying for purchase of such New 2058 Bonds and did not submit an Electronic Voting Instruction voting in favour of the Proposals.

The denominations of the New 2058 Bonds will be GBP100,000 (and integral multiples of GBP1,000 in excess thereof up to and including GBP199,000). Accordingly, in order for any priority in the allocation of the New 2058 Bonds to be effective, Bondholders will need to have a minimum of GBP100,000 in aggregate principal amount of Notes in respect of which an Electronic Voting Instruction voting in favour of the Proposals is submitted.

In order for a Bondholder to be eligible to receive a Priority Allocation, a unique reference number (the "Allocation Identifier Code") must be quoted in that Bondholder's Electronic Voting Instruction. A Noteholder can obtain such an Allocation Identifier Code by contacting Morgan Stanley using the contact details set out on the back cover of this Solicitation Memorandum.

The quoting of an Allocation Identifier Code in conjunction with any voting of Bonds in the Consent Solicitation is not an allocation of the New 2058 Bonds. In order to apply for the purchase of the relevant New 2058 Bonds, subject to the Consent Solicitation being approved and the Issuer and Morgan Stanley deciding to proceed with the issuance of the New 2058 Bonds, such Bondholder must make a separate application to Morgan Stanley for the purchase of such New 2058 Bonds.

For the avoidance of doubt, the ability to purchase New 2058 Bonds and for the Priority Allocation to be effective is subject to all applicable securities laws and regulations in force in any relevant jurisdiction. In the event that any such Bondholder is ineligible to be offered or to be sold the New 2058 Bonds in accordance with any applicable securities laws and regulations then no Priority Allocation will be given.

Recommendation to vote in favour of the Proposals

The Proposals have been considered by a Special Committee (the "Special Committee") of The Investment Association at the request of the Issuer. The members of the Special Committee, who hold in aggregate approximately 40.38 per cent. of the Bonds, have examined the Proposals. They have informed the Issuer that they find the Proposals acceptable; that, subject to client and other approvals, they intend to vote in favour of the Proposals in respect of their holdings of the Bonds; and they invite other members of The Investment Association to consider a similar course of action. The Special Committee has advised the Issuer that this recommendation relates only to the Proposals with respect to the Bonds and not to any future offers or proposals which the Issuer may make.

Early Instruction Fee and Base Fee

Subject to the conditions set out in this Solicitation Memorandum and the approval and implementation of the Extraordinary Resolution, the Issuer will pay to (i) each Holder of the Bonds that has delivered a valid Electronic Voting Instruction which has been received by the Tabulation Agent at or prior to the Early Instruction Deadline, which has not been validly withdrawn at or prior to the Expiration Time and which remains in full force and effect until the conclusion of the Meeting, the Early Instruction Fee, by reference to the Principal Amount Outstanding of the Bonds the subject of such Electronic Voting Instruction and (ii) each Holder of the Bonds that has delivered a valid Electronic Voting Instruction which has been received by the Tabulation Agent after the Early Instruction Deadline but at or prior to the Expiration Time, which has not been validly withdrawn at or prior to the Expiration Time and which remains in full force and effect until the conclusion of the Meeting, the Base Fee, by reference to the Principal Amount Outstanding of the Bonds the subject of such Electronic Voting Instruction.

Any Early Instruction Fee or Base Fee, as the case may be, shall be paid on the Payment Date via the relevant Clearing System for payment to the cash account of an eligible holder of Bonds in such Clearing System.

Early Instruction Fee: 15bps of the Principal Amount Outstanding of the Bonds

Base Fee: 5bps of the Principal Amount Outstanding of the Bonds

Expected Timetable

The times and dates below (other than the time and date of the Meeting and the Expiration Time) are indicative only. Accordingly, the actual timetable may differ significantly from the expected timetable set out below.

 
                   Event                               Date 
Announcement of Proposals and Notice                   16 November 
 of Meeting given to Bondholders                              2016 
 through the Clearing Systems. 
Solicitation Memorandum and drafts                     16 November 
 of the Final Terms Amendment, the                            2016 
 Second Supplemental Bond Trust Deed 
 and the Second Supplemental Agency 
 Agreement to be made available at 
 the specified office of the Tabulation 
 Agent (copies of which are obtainable 
 by Bondholders upon request, free 
 of charge). 
Early Instruction Deadline: Latest               4.00 p.m. (London 
 time and date for receipt of Electronic                     time) 
 Voting Instructions through the                    On 28 November 
 Clearing Systems voting in favour                            2016 
 of the Extraordinary Resolution 
 to be received by the Tabulation 
 Agent for eligibility for payment 
 of the Early Instruction Fee. 
Expiration Time: Latest time and                 4:00 p.m. (London 
 date for (i) delivery and receipt                           time) 
 by the Tabulation Agent of valid                    on 5 December 
 Electronic Voting Instructions through                       2016 
 the Clearing Systems (such Electronic 
 Voting Instructions are irrevocable 
 from this date) and (ii) obtaining 
 a voting certificate from the Principal 
 Paying Agent and for the issuance 
 or revocation of a voting instruction 
 whether given by way of an Electronic 
 Voting Instruction or otherwise. 
Time and date of the Meeting.                           Commencing 
                                                      at 9:00 a.m. 
                                                     (London time) 
                                                     on 8 December 
                                                       2016 as set 
                                                        out in the 
                                                 Notice of Meeting 
Notice of results of the Meeting                Promptly following 
 to be given to Bondholders through                    the Meeting 
 the Clearing Systems.                               on 8 December 
                                                              2016 
If the Extraordinary Resolution 
 is approved and implemented 
Execution of the Second Supplemental                   On or about 
 Bond Trust Deed and the Second Supplemental            8 December 
 Agency Agreement.                                            2016 
Payment of any Early Instruction                        9 December 
 Fee or Base Fee, as the case may                             2016 
 be. 
 

General

Subject to applicable law and as provided in the Solicitation Memorandum, the Issuer may, in its sole discretion, amend the terms of (save for the terms of the Extraordinary Resolution or the Expiration Time), terminate or withdraw the Consent Solicitation at any time prior to the Solicitation Amendment Deadline.

Bondholders are advised to check with the bank, securities broker, custodian, Clearing System or other intermediary through which they hold their Bonds whether such intermediary will apply different deadlines for participation to those set out in the Solicitation Memorandum and, if so, should adhere to such deadlines if such deadlines are prior to the deadlines set out in the Solicitation Memorandum.

In relation to the delivery or revocation of Electronic Voting Instructions, in each case, through the Clearing Systems, Bondholders holding Bonds in Euroclear or Clearstream, Luxembourg should note the particular practice of the relevant Clearing System, including any earlier deadlines set by such Clearing System.

Only direct accountholders in Euroclear or Clearstream, Luxembourg may deliver Electronic Voting Instructions. Bondholders who are not direct accountholders in Euroclear or Clearstream, Luxembourg should arrange for the accountholder through which they hold their Bonds to deliver an Electronic Voting Instruction on their behalf to the relevant Clearing System as more particularly described in the Solicitation Memorandum. The deadlines specified by the relevant Clearing System may be earlier than the Expiration Time.

Bondholders are advised to read carefully the Solicitation Memorandum for full details of and information on the procedures for participating in the Consent Solicitation.

A complete description of the terms and conditions of the Consent Solicitation will be set out in the Solicitation Memorandum.

For Further Information:

Further details on the Consent Solicitation and copies of the Solicitation Memorandum can be obtained from:

The Solicitation Agent

Morgan Stanley & Co. International plc

25 Cabot Square

Canary Wharf

London E14 4QA

United Kingdom

   Tel:                  [phone] 
   Email:             [e-mail] 
   Attention:         Liability Management 

The Tabulation Agent

Lucid Issuer Services Limited

Tankerton Works

12 Argyle Walk

London WC1H 8HA

United Kingdom

   Telephone:       [phone] 
   Email:            [e-mail] 
   Attention:         Thomas Choquet 

Disclaimer

This announcement must be read in conjunction with the Solicitation Memorandum. The Solicitation Memorandum contains important information which should be read carefully before any decision is made with respect to the Consent Solicitation. If any Bondholder is in doubt as to the action it should take, it is recommended to seek its own financial advice, including as to any tax consequences, from its stockbroker, bank manager, solicitor, accountant, independent financial adviser authorised under the Financial Services and Markets Act 2000 (if in the United Kingdom) or other appropriately authorised financial adviser. Any individual or company whose Bonds are held on its behalf by a broker, dealer, bank, custodian, trust company or other nominee must contact such entity if it wishes to participate in the Consent Solicitation.

This information is provided by RNS

The company news service from the London Stock Exchange

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November 16, 2016 12:19 ET (17:19 GMT)