Arendal Restructures $175 Million in Debt

February 02, 2017

New York, NY - Paul Hastings, a leading global law firm, announced today that the firm represented Arendal, S. de R.L. de C.V. (“Arendal”), a Mexican engineering, procurement and construction company, in connection with the out-of-court restructuring of $175 million of its debt. The restructuring included a $103 million exchange offer that was used to refinance Arendal’s existing medium-term notes that had matured in May 2016.

Pursuant to the exchange offer, in which 98% in principal amount of the existing medium-term notes were tendered for exchange, Arendal issued approximately $103 million principal amount of 11.5% Senior Secured Notes due 2021 in exchange for approximately $98 million principal amount of its outstanding 10.50% Medium-Term Notes due 2016, which were unsecured. The new notes are secured by liens on Arendal’s collection rights and cash flows generated from one of its existing development projects and from future development projects, in each case subject to any first-priority security interest securing related project debt. The new notes include a payment-in-kind component, whereby the amount of interest accrued on the existing notes during the last interest period through the settlement date was included as principal in lieu of the cash payment of such accrued interest, as well as an option for Arendal to capitalize interest for certain periods going forward.

In connection with the debt restructuring, Paul Hastings also advised Arendal regarding the amendment and restatement of its approximately $60 million secured credit facility with Haitong Bank and an exchange offer that was used to refinance approximately $13 million in principal amount of Arendal’s existing secured 10.5% Euro Notes due 2016 that had matured in December 2016. Pursuant to the terms of an intercreditor agreement, the holders of this additional restructured debt also share the collateral that secures the new notes on an equal and ratable basis.

The exchange offer and related transactions represent another example of capital markets alternatives being used successfully to refinance a Mexican company’s debt to avoid the protracted and costly alternative of a Mexican concurso mercantil proceeding. Since Arendal’s principal customer is Pemex, the success of this transaction is even more remarkable given the well-known difficulties for suppliers in this industry.

Latin America practice partners Michael Fitzgerald and Joy Gallup led the team, which also included of counsel Pedro Reyes, associate Stephanie Rohlfs and foreign associate Rodrigo Guaida.

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