Alsacia & Express Announce Agreement in Principle with Informal Group of Noteholders on Terms of Restructuring - WAFF-TV: News, Weather and Sports for Huntsville, AL

Alsacia & Express Announce Agreement in Principle with Informal Group of Noteholders on Terms of Restructuring

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SOURCE Inversiones Alsacia S.A.; Express de Santiago Uno S.A.

SANTIAGO DE CHILE, Chile, Aug. 19, 2014 /PRNewswire/ -- Inversiones Alsacia S.A. and Express de Santiago Uno S.A. (together with their subsidiaries and affiliates, the "Company") announced today that they have reached an agreement in principle (the "Agreement") with an informal group of holders (the "Informal Group") that, collectively, holds more than 60% of the principal amount of the Company's 8% senior secured notes due 2018 (the "Existing Notes") to restructure the terms of the Existing Notes.  The Agreement, which is subject to the negotiation of definitive documentation, contemplates the issuance of new notes that will provide the Company with financial flexibility – by extending the maturity of the notes, re-profiling the mandatory amortization payment schedule and modifying existing covenants to facilitate the Company's acquisition of new buses – in order to best position the Company to provide improved services and successfully pursue the three year extension available under each of its existing concession agreements.   

A spokesperson for the Company commented, "With this agreement, the Company expects to continue to provide uninterrupted bus services to the citizens of Santiago and will continue to meet its obligations to its vendors and employees, who will not be negatively impacted in any way by the Agreement.  In addition, this agreement will better position the company to invest in new buses that will enable it to provide improved service to the Chilean public and reduce contamination of the local environment."

The Company has not experienced and does not expect to experience any disruptions in its operations during its reorganization process. Specifically, the Company expects to continue to:

  • operate its full schedule of services to the citizens of Santiago;
  • provide its employees with wages, healthcare coverage, vacation days, and similar benefits without interruption; and
  • pay suppliers for goods and services received throughout the reorganization process.

The Company expects that, now that it has an agreement in principle with the Informal Group, it can move forward in its dialogue with the Ministry of Transportation and Telecommunications in an effort to establish the right conditions to ensure the long-term financial equilibrium of all concessionaries in the Transantiago system and improve the operational indicators and the service to the citizens of Santiago.

Consistent with the Agreement, the Company did not make its scheduled principal or interest payments due today under the indenture for the Existing Notes (the "Indenture") and has entered into a forbearance agreement with the Informal Group in the form of Exhibit 1 attached below (the "Forbearance Agreement").  Pursuant to the Forbearance Agreement, the Informal Group has agreed to forbear from pursuing any remedies under the Indenture in respect of defaults thereunder for a period of up to 4 days, subject to a possible extension if mutually agreed upon by the Company and the Informal Group. The Company and the Informal Group have agreed to negotiate in good faith, during the forbearance period, definitive documentation memorializing the Agreement, which is described in greater detail in the agreed term sheet attached as Exhibit 2 below (the "Agreed Term Sheet").  The Company's direct and indirect shareholders, including Carlos Mario Rios Velilla and Francisco Javier Rios Velilla, have advised the Company that they are supportive of the agreement reflected in the Agreed Term Sheet subject to the successful negotiation and execution of definitive documentation.  The Company intends to implement the Agreement through a prepackaged plan of reorganization filed under Chapter 11 in the United States.  No assurances can be given that definitive documentation will be executed or that the Company will be able to successfully execute a restructuring.

The Company has also received termination notices in respect of certain hedging agreements entered into with Merrill Lynch Capital Services Inc. and Credit Suisse International as a result of the Company's failure to pay certain amounts due thereunder.  The Company's nonpayment of its obligations under the Indenture and the hedging agreements only impacted the holders of the Existing Notes and the hedge agreement counterparties, and no other creditors or suppliers were affected or should expect to be impacted by this announcement.  The Company remains current on all of its other obligations.

Finally, in connection with the discussions with the Informal Group relating to the restructuring of Company's obligations under the Existing Notes, the Company has, since July 15, 2014, provided the Informal Group with certain non-public information relating to the Company (the "Disclosed Information").  Pursuant to confidentiality agreements entered into by the Company with the members of the Informal Group, each dated as of July 15, 2014, the Company agreed to publicly disclose the Disclosed Information if certain events occurred.  This information is being disclosed on the Company's website (www.exps1.cl or www.alsacia.cl) under the heading "Inversionistas – Comunicados y Noticias" for both Inversiones Alsacia S.A. and Express de Santiago Uno S.A. to comply with the Company's obligations under the confidentiality agreements.

EXHIBIT 1: FORBEARANCE AGREEMENT

EXECUTION VERSION

 

August 18, 2014

Inversiones Alsacia S.A.
Avenida Santa Clara 555
Huechuraba, Santiago, Chile
Attn: Jose Ferrer Fernandez

Re:  Indenture, dated February 18, 2011, as modified by the First Supplemental Indenture dated as of February 28, 2011, the Second Supplemental Indenture dated as of December 16, 2011, and the waivers granted pursuant to the Amended and Restated Consent Solicitation Statement dated September 25, 2013, as supplemented on October 3, October 10 and October 14, 2013 (the "Indenture")1  

Dear Mr. Ferrer:

On August 18, 2014, Inversiones Alsacia S.A. ("Alsacia", together with each of the undersigned guarantors, the "Obligors") failed or will fail to make the principal amortization and coupon payment as required on August 18, 2014 under the Indenture (the "Existing Defaults").  The Obligors and the Undersigned Noteholders (as defined below) (together with the Obligors, the "Parties") are involved in negotiations concerning a potential prepackaged plan of reorganization filed under chapter 11 of the United States Bankruptcy Code in the United States of America with regard to a restructuring of the Notes (a "Possible Transaction") and agree to be bound by this letter agreement as provided herein. 

1.      Forbearance. Solely during the Forbearance Period (as defined below), the undersigned holders (the "Undersigned Noteholders") of the percentage of Alsacia's 8% senior secured notes due 2018 (the "Notes") provided on the date hereof by each Undersigned Holder by email to counsel for the Obligors and counsel for the Informal Group (the "Holdings Information"), subject to the other terms and conditions of this letter agreement, agree to forbear (the "Forbearance") from taking any Enforcement Action (as defined below) on account of the Existing Defaults.  The Forbearance is limited to the extent described herein and shall not be construed to be a consent to or a waiver of any other terms, provisions, covenants, warranties or agreements contained in the Indenture or in any other agreements or documents executed in connection therewith, or any other right in law or equity. 

2.      Conditions Precedent to Effectiveness. As conditions precedent to the effectiveness of this letter agreement, (i) the Obligors shall have rescinded in writing the termination of the Advisor Engagement Letters (as defined below) such that the respective Advisor Engagement Letters shall be enforceable and effective as of the respective original effective dates of such Advisor Engagement Letters and continue through the effectiveness of this letter agreement, and (ii) the Obligors shall have delivered to the Undersigned Noteholders counterparts to this letter agreement, each duly executed by each Obligor.

The "Forbearance Period" shall begin on August 18, 2014 and, unless extended by an Undersigned Noteholder pursuant to an Extension (as defined below), shall immediately and automatically (without any required notice) terminate with respect to all Parties on the earlier of (1) the occurrence of any Termination Event (as defined below) and (2) 11:59 p.m. New York time on August 22, 2014.  Upon the termination of the Forbearance Period, the Forbearance shall immediately and automatically terminate and have no further force and effect with respect to the terminating Undersigned Noteholder or the Parties, as the case may be, and the Undersigned Noteholder or Undersigned Noteholders, as the case may be, shall be entitled to undertake any Enforcement Action, or any other action, from and after such date and time subject to the terms of the Indenture, the other Finance Agreements and applicable law, as if this letter agreement had never existed.

"Termination Event" means any of the following events or circumstances: (a) holders (or managers for holders) of a majority in principal amount of the Notes held by the Undersigned Holders as of the date hereof (the "Majority Holders") provide written notice to the Obligors of the termination of this letter agreement; (b) the occurrence of any event of the types described in Section 7.01(h) of the Indenture, in each case without giving effect to any cure or other time periods specified therein, any requirements for knowledge, awareness or notice, or any other prerequisites that would otherwise be applicable thereto (each such event described in this clause (b) being an "Insolvency Event" and any related proceeding being an "Insolvency Proceeding"); (c) any Obligor breaches or defaults in the performance of, or compliance with, any covenant, agreement or other term contained herein, including the obligation to pay all fees and expenses that have been invoiced by each of the Informal Group Advisors (as defined below) for services rendered through August 11, 2014 no later than August 19, 2014; (d) Alsacia (A) terminates, purports to terminate, or provides any notice in respect of the termination of, any of the Advisor Engagement Letters, or (B) fails to make any payment due and owing in accordance with the terms of any Advisor Engagement Letter within the time period specified therein (as modified herein); (e) any Obligor notifies the Informal Group (as defined below) or its representatives or members that the Obligors are terminating discussions with the Informal Group regarding a Possible Transaction; (f) any Obligor receives notice that the government of the Republic of Chile (or other authority with necessary power) has terminated or intends to terminate the Alsacia or Express de Santiago Uno, S.A ("Express") "Concession Agreement" or has exercised remedies under section 8 of the respective Concession Agreement; or (g) any other creditor of the Obligors (including any Holders of the Notes or the Trustee, other than an Undersigned Holder taking action in violation of this letter agreement) in respect of Debt of US$5.0 million or more takes any action to accelerate or enforce any remedies under their respective debt instruments. The Obligors agree and covenant to provide prompt, written notice to the Undersigned Noteholders of the occurrence of any Termination Event described in clauses (f) and (g) of this paragraph.

"Enforcement Action" means any of: (a) the acceleration of the Notes pursuant to the Indenture; (b) the filing of any involuntary Insolvency Proceeding against the Obligors; (c) the taking of any steps to enforce or require the enforcement of any of the rights under the Collateral Trust Agreement granted in favor of the U.S. Collateral Trustee; (d) the filing of a complaint commencing a lawsuit to collect payment of amounts due in respect of its Notes; (e) the exercise of any right of set-off or direct debt against the Obligors; and (f) the suing for, commencing or joining of any legal or arbitration proceedings against the Obligors.

"Extension" means the election of any Undersigned Noteholder to extend the Forbearance Period at any time, including after the termination of the Forbearance Period.  Any Undersigned Noteholder may so extend by delivering a written notice to Alsacia electing to extend the Forbearance Period with respect to such Undersigned Noteholder.  In such event, the Forbearance Period shall be extended with respect to such Undersigned Noteholder to the date, and subject to the termination events and other conditions, specified or referenced in such notice.  No such notice or notices shall extend the Forbearance Period with respect to, nor affect any right of, any Undersigned Noteholder that is not a signatory to such notice. No Undersigned Noteholder has any obligation to extend the Forbearance Period, and each Undersigned Noteholder, in its sole and absolute discretion, with or without cause, with or without any change in circumstances, and with or without any prior notice or discussion, may elect not to extend its Forbearance Period.

"Advisor Engagement Letters" means the engagement letters that the Obligors have entered into with the professional advisors to that certain informal group of holders of Notes (the "Informal Group"), including specifically Akin Gump Strauss Hauer & Feld LLP, Blackstone Advisory Partners L.P., Carey y Cia. Ltda. and Pablo Rodriguez (such advisors, the "Informal Group Advisors"), after the engagement letters that were previously terminated are reinstated pursuant to a withdrawal of all applicable termination notices sent by the Obligors on August 10, 2014.

3.      Agreement to Negotiate; Agreement to Pay Fees; Representation Regarding Shareholder Support.

a.       During the Forbearance Period, the Undersigned Noteholders and the Obligors agree to negotiate in good faith  a definitive restructuring support agreement ("Definitive Documentation") in respect of the term sheet attached hereto as Exhibit 1 (the "Term Sheet"); provided that termination of the Forbearance Period by Majority Holders in accordance with clause (a) of the definition of Termination Event, with or without cause, with or without any change in circumstances, and with or without any prior notice or discussion, shall be deemed not to violate the obligations in this paragraph to negotiate in good faith.  No legally binding rights or obligations under this paragraph shall survive the termination of negotiations by the Majority Holders or the termination of this letter agreement, or be created, implied or inferred with respect to the subject matter of  this paragraph, nor after any such termination shall any Party have any obligation to negotiate Definitive Documentation, and no such obligation shall arise by course of conduct or otherwise,  unless and until Definitive Documentation, if any, shall have been executed and delivered by each of the Parties hereto.

b.      The Obligors agree to pay, on or before August 19, 2014, all fees and expenses that have been invoiced by each of the Informal Group Advisors for services rendered in accordance with the Advisor Group Engagement Letters through August 11, 2014.

c.       The Obligors represent and warrant  that their direct and indirect shareholders Global Public Services, S.A., Carlos Mario Rios Velilla and Francisco Javier Rios Velilla (collectively, the "Shareholders") have advised the Obligors that the Shareholders support the transactions contemplated by the Term Sheet, subject to the successful negotiation and execution of Definitive Documentation, and the Obligors' efforts to successfully negotiate and execute such documentation promptly.

4.      Disclosure. The Obligors hereby agree that immediately upon the earlier of (i) 11:59 p.m. New York time on August 22, 2014 or (ii) the occurrence of a Termination Event (the "Disclosure Time"), the Obligors shall disclose and make generally available to the public (such obligation, the "Blowout Obligation"): (i) any projected financial information provided by or on behalf of the Obligors to the Informal Group or its members; (ii) if Definitive Documentation has not been executed or approved by each of the Parties, the most recent proposal regarding the Definitive Documentation (including the then-current version of any associated term sheet) made by the Obligors to the Informal Group or its members and the most recent counterproposal, if any, made by the Informal Group or its members to the Obligors prior to the Disclosure Time; (iii) the fact that negotiations between the Obligors and third parties concerning a Possible Transaction have taken place; (iv) whether such negotiations are or are not continuing; (v) a detailed description of the terms of any agreement reached with respect to the Definitive Documentation (including the then-current version of any associated term sheet); and (vi) any other Confidential Information (as such term is defined in the Confidentiality Agreements) that would be material to an investor making an investment decision with respect to the purchase or sale of any Obligor's debt securities, in each case to the extent not theretofore the subject of a Public Disclosure (as defined below) (such information set forth in (i) through (vi) is referred to herein as "Investor Confidential Information"). As promptly as practicable, but in no event (A) less than 48 hours in advance of the Disclosure Time with regard to (i) any termination occurring as a result of clause (2) of the definition of Forbearance Period or (ii) any termination occurring as a result of clause (b) of the definition of Termination Event if such event occurs due to a "voluntary" Insolvency Event, or (B) more than 12 hours following the Disclosure Time resulting from any other event specified in the definition of Termination Event, the Obligors will provide each of the Undersigned Noteholders with a draft of the proposed form of disclosure of the Investor Confidential Information. Disclosure of the Investor Confidential Information shall be conducted (and in the case of (B) above, no later than 16 hours following the Disclosure Time) through an hecho relevante filed with the Chilean Superintendencia de Valores y Seguros (to the extent permitted to be filed therewith) and a press release issued through any internationally recognized press release service such as PR Newswire (such filing and issuance, a "Public Disclosure"), which press release may include a reference to an internet address on Alsacia's website that the Obligors may utilize as the means to publicly disclose Investor Confidential Information in compliance with this letter agreement. The Obligors agree that, in the event that the Obligors fail to disclose the Investor Confidential Information, or any portion thereof, as determined in good faith by the each of the Undersigned Noteholders in their sole judgment, by the Disclosure Time (or post any referenced information on its website), each of the Undersigned Noteholders may seek specific performance of the Obligors' obligations hereunder, or in the alternative, automatically and requiring no further act or notice hereunder or otherwise, each of the Undersigned Noteholders is authorized to disclose and make generally available to the public through the issuance of a press release or similar form of public communication such Investor Confidential Information (the "Recipient Disclosure Right"). The Obligors acknowledge and agree that none of the Undersigned Noteholders or their designees shall have any liability hereunder to the Obligors or their managers, directors, officers, members, partners, associates, employees, attorneys, subcontractors, consultants, accountants, auditors, advisors, agents, representatives, co-investors or potential financing sources (collectively, the "Representatives") or any other Person, including for any special, indirect, punitive, or consequential damages in contract, tort, warranty, strict liability or otherwise, as a result of any action taken or not taken by the Undersigned Noteholders or their designees related to the subject matter of this paragraph 4.

5.      Modification to Confidentiality Agreements. Notwithstanding anything to the contrary in the Confidentiality Agreements (collectively, the "Confidentiality Agreements") entered into between Alsacia and each of Akin Gump Strauss Hauer & Feld LLP, Blackstone Advisory Partners L.P., Carey & Cia. Ltda. and Pablo Rodriguez on June 13, 2014, June 16, 2014, July 3, 2014 and July 14, 2014, respectively, each of the aforementioned Informal Group Advisors shall be authorized to disclose to any Undersigned Noteholder or their Representatives or any future members of the Informal Group or their Representatives the substance and terms of any discussions or negotiations that have taken place or are taking place between Alsacia and its Representatives concerning the Possible Transaction or the terms of the proposals and counter-proposals of the Parties to such discussions and any other information related to the foregoing, other than Advisor-Only Information (as defined in the Confidentiality Agreements); provided that in the event that any Undersigned Noteholder or future member of the Informal Group engages any external attorneys, consultants, or other similar advisors for the purpose of advising such Undersigned Noteholder with respect to the transactions contemplated by the Term Sheet (other than the Informal Group Advisors), such external Representative shall have signed a confidentiality agreement with the Obligors.

6.      Governing Law, Venue and Waiver of Jury Trial. This letter agreement shall be construed in accordance with and governed by the laws of the State of New York.  Sections 13.10 and 13.11 of the Indenture are incorporated herein by this reference, mutatis mutandis, as if set forth in full herein.

7.      Transfers. Nothing in this letter agreement will limit or otherwise restrict the ability of any Undersigned Noteholder to buy, sell or otherwise transfer its Notes.  Subject to compliance with applicable securities laws, any of the Undersigned Noteholders (including members of the Informal Group) may hypothecate, pledge, convey, transfer assign or sell the Notes or other obligations of any Obligor without the consent of any Obligor; provided, however, if, following execution of this letter agreement by an Undersigned Noteholder, such Undersigned Noteholder hypothecates, pledges, conveys, transfers, assigns or sells (collectively, a "Transfer") all or part of the Notes held by such Undersigned Noteholder to any Person (each such Person, a "Transferee"), the Transferee must, as a condition precedent to such Transfer, execute an assumption in substantially the form set forth hereto as Exhibit 2 (the "Assumption Agreement"), and deliver an executed copy to the Obligors and to counsel for the Informal Group.  An Undersigned Noteholder shall notify counsel for the Obligors and counsel to the Informal Group in writing of any Transfer by such Undersigned Noteholder of Notes within one Business Day of the execution of an agreement (or trade confirmation) in respect of such Transfer.

8.      Acquisition of Notes.  This Agreement shall in no way be construed to preclude any Undersigned Noteholder from acquiring additional Notes; provided, however, that any such additional Notes automatically shall be deemed to be subject to the terms of this letter agreement.  An Undersigned Noteholder shall notify counsel for the Informal Group, in writing, of any Notes acquired by it within one Business Day of the execution of an agreement (or trade confirmation) in respect of such acquisition.

9.      Acknowledgments. The Obligors and the Undersigned Noteholders hereby acknowledge and agree that, (i) the relationships between the Obligors and the Holders are governed by the Notes, the Indenture, the other Finance Agreements and this letter agreement, (ii) no fiduciary duty or special relationship is or will be created by any discussions regarding any possible amendment, waiver or forbearance, (iii) the rights and obligations of the Undersigned Noteholders under this letter agreement, and the rights and obligations of the Holders under the Finance Agreements, are several and not joint, (iv) no Holder has made to any Obligor, and no Obligor has made to any Holder, any promise, commitment or representation of any kind or character with respect to any other forbearance or any amendment, supplement, waiver or other modification with respect to any Finance Agreement, (v) except to the extent expressly set forth in paragraph 3 of this letter agreement, no Person has any obligation to engage in discussions with any other Person after the date hereof regarding any further forbearance or any amendment, supplement, waiver or other modification of any Finance Agreement, and (vi) no Holder and no Obligor has any obligation under any circumstances to amend, waive, supplement or otherwise modify the terms of the Indenture, the Notes or any other Finance Agreement, offer any discounted payoff of the Notes, refinance the Notes, vote or refrain from voting or otherwise acting with respect to its Notes, extend the Forbearance Period, grant any other forbearance, agree to any amendment, supplement, waiver or other modification, or extend any other accommodation, financial or otherwise, to any Obligor or any of its Affiliates or to any Holder.

10.  Confidentiality. The Parties agree that the Holdings Information for each individual Undersigned Noteholder and the identity of such Undersigned Noteholder shall be kept confidential, and such information shall not be disclosed to any other Person, except that Alsacia may disclose such information to its professional advisors on a need-to-know basis subject to customary confidentiality obligations; provided, however, the aggregate holdings of the Undersigned Noteholders may be publicly disclosed.

11.  Miscellaneous. This letter agreement may be executed and delivered (by facsimile, electronic mail, or otherwise) in any number of counterparts, each of which, when executed and delivered, shall be deemed an original, and all of which together shall constitute the same agreement.  Except as set forth herein, each of the Parties hereto expressly reserves all rights and remedies under the Finance Agreements and at law and in equity.  This letter shall not constitute an amendment or waiver of or consent of any provision of the Finance Agreements and shall not be construed as an amendment, waiver or consent to any action on the part of the Obligors that would require an amendment, waiver or consent of the Holders except as expressly stated herein. This letter agreement may not be amended or changed except in a writing signed by the Party to be bound by said amendment or modification.

12.  Termination and Survival. Upon the termination of the Forbearance Period, all obligations, covenants and agreements under this letter agreement shall terminate and shall no longer be in force and effect, except for paragraphs 4, 5, 6, 10, 11, 12 and 13.

13.  Third Party Beneficiaries.  There shall not be third party beneficiaries to this letter agreement, except for the Informal Group Advisors, who shall be third party beneficiaries with regard to the Recipient Disclosure Right and the modifications to the Confidentiality Agreements in paragraph 5 of this letter agreement.

Please acknowledge and agree to the foregoing by signing and returning a copy of this letter agreement to the address above.

Sincerely,

[Insert Name of each Undersigned Noteholder]

By:                                                                                                                                                      

Name: ______________________________

Title: _______________________________

Date: _______________________________


Accepted and Agreed:

INVERSIONES ALSACIA S.A.

By:  ________________________________

Name: ______________________________

Title: _______________________________

Date: _______________________________


Guarantors:

EXPRESS DE SANTIAGO UNO S.A.

By:  ________________________________

Name: ______________________________

Title: _______________________________

Date: _______________________________

ECO UNO S.A.

By:  ________________________________

Name: ______________________________

Title: _______________________________

Date: _______________________________

PANAMERICAN INVESTMENTS LTD.

By:  ________________________________

Name: ______________________________

Title: _______________________________

Date: _______________________________


EXHIBIT 1

TERM SHEET


EXHIBIT 2

JOINDER AGREEMENT

Reference is hereby made to the certain forbearance agreement dated August 18, 2014 (as such agreement may be amended, modified, supplemented from time to time the "Forbearance Agreement") among Inversiones Alsacia S.A. and certain of its affiliates and the Undersigned Noteholders party hereto.  Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Forbearance Agreement.  As a condition precedent to becoming the beneficial holder or owner of [___________] dollars ($_________) in [____] Notes (as defined in the Forbearance Agreement), the undersigned ________________ (the "Transferee"), hereby agrees to become bound by the terms, conditions and obligations set forth in the Forbearance Agreement.  This Joinder Agreement shall take effect and shall become an integral part of the Forbearance Agreement immediately upon its execution and the Transferee shall be deemed to be bound by all of the terms, conditions and obligations of the Forbearance Agreement as of the date thereof and such Transferee shall be deemed an Undersigned Noteholder thereunder.

IN WITNESS WHEREOF, the ASSUMPTION AGREEMENT has been duly executed by each of the undersigned as of the date specified below.

Date _________________, 2014

 

 

___________________________________
Name of Transferor

___________________________________
Authorized Signatory of Transferor

___________________________________
(Type or Print Name and Title of Authorized Signatory)






 

 

 

 

___________________________________
Name of Transferee

___________________________________
Authorized Signatory of Transferee

____________________________________
(Type or Print Name and Title of Authorized Signatory)

Address of Transferee

______________________________
______________________________
______________________________
Attn:__________________________
Tel:___________________________
Fax:___________________________
Email:_________________________

 

EXHIBIT 2: AGREED TERM SHEET


PROJECT TOKEN

TERM SHEET

The terms set out in this illustrative term sheet (this "Term Sheet") are preliminary and indicative only, and are solely for discussion purposes. This Term Sheet is neither an express nor implied commitment to provide any financing or to provide or purchase any loans, securities or assets, or to do or take, or to refrain from taking, any action.  This Term Sheet is being presented by the Company (as defined below) on a confidential basis and may be shared only with the officers, directors and professional advisors of the Company as is necessary for the purpose of evaluating the transactions described in this Term Sheet. Nothing in this Term Sheet shall oblige Inversiones Alsacia S.A. ("Alsacia"), Express de Santiago Uno S.A. ("Express"), Inversiones Eco Uno S.A. ("Eco Uno"), Panamerican Investments Ltd. ("Panamerican") and Camden Servicios SpA ("Camden", and together with Express, Eco Uno and Panamerican, the "Guarantors", and together with Alsacia, the "Company" or the "Companies") or any of its creditors, including the informal group of holders (the "Informal Group") of Alsacia's 8% Senior Secured Notes due 2018 (the "Existing Notes"), or any of its members or representatives, to restructure any of the debt of the Company.  This Term Sheet is not an offer with respect to any securities or a solicitation of consent with respect to any restructuring plan.  The rights of all parties are subject to the negotiation and execution of definitive documentation.  Unless and until the execution and delivery of definitive documentation by the necessary parties, the parties shall retain their respective rights and any negotiation of or agreement to this Term Sheet shall not be deemed a waiver of any rights of any party.  If executed, the terms of such definitive documentation shall control.  This Term Sheet is subject to Rule 408 of the United States Federal Rules of Evidence and other applicable and similar rules or laws. Capitalized terms used herein and not otherwise defined shall have the meanings assigned in the indenture for the Existing Notes, dated February 18, 2011, as modified by the First Supplemental Indenture dated as of February 28, 2011, the Second Supplemental Indenture dated as of December 16, 2011, and the waivers granted pursuant to the Amended and Restated Consent Solicitation Statement dated September 25, 2013, as supplemented on October 3, October 10 and October 14, 2013 (the "Existing Indenture").

Restructuring Principles










The proposed transaction is premised upon the following principles:

-  Provide significant financial flexibility to the Company by reducing scheduled amortization over the next four years, relaxing financial covenants and extending maturity on the Existing Notes by three years;

 

-  Provide relief to allow the Company to finance the purchase or lease of new buses, which will allow the Company to reduce emissions and provide improved service to the people of Santiago; and

 

-  Provide near-term financial incentives (and long-term benefits) to the Company's management and shareholders to drive improved performance under the Concession Agreements and properly position the Company to obtain Qualifying Concession Extensions (as defined below).

Terms of the New Notes

 

Principal

$347.3 million plus accrued and unpaid interest up to, and including, the date of closing.

Maturity

 

 

 

December 31, 2018, which, if both Concession Agreements are extended through at least April 22, 2021 (the "Qualifying Concession Extensions")2, shall, at the Company's election, extend until the 90th day after the termination date of the extended Concession Agreement that expires last (including pursuant to any extension of both Concession Agreements beyond April 22, 2021 or replacement of such Concession Agreements with new concession contracts with a termination date on or after April 22, 2021 (a "Further Concession Extension")).

Interest

8.00%, payable semi-annually in cash.

Mandatory Amortization  Schedule





















-  Paid semi-annually in cash.

 

-  The mandatory amortization schedule is based on 1.2x coverage of mandatory debt service payments and will be as follows: 

 

                                                        2014    2015    2016    2017    2018    2019    2020   2021

Mandatory Amortization Schedule     1.0       7.2     18.7     20.2     19.3     14.4     28.0        --

 

In the event that either (i) any restructuring advisors' fees or expenses related to the restructuring and any withholding taxes or other costs in connection therewith ("Restructuring Fees") are unpaid or (ii) a hedge agreement related to the New Notes has not been entered into by the Company as of December 31, 2014, the December 31, 2014 mandatory amortization payment will be rescheduled to June 30, 2015.  (In addition, if the events described in the preceding sentence occur, the December 31, 2014 Excess Cash Flow sweep will also be rescheduled to June 30, 2015.)

If the total amount of all Restructuring Fees and all payments related to the termination of any outstanding hedge agreements or the entering into of new hedge agreements ("Total Restructuring Fees and Hedge Payments") is greater than the budget agreed upon by the Company and the Informal Group ("Budgeted Restructuring Fees and Hedge Payments"), the December 31, 2014 mandatory amortization payment (which, subject to the above paragraph, may be rescheduled to June 30, 2015), and any subsequent mandatory amortization payment(s), shall be reduced, in order of maturity, dollar for dollar by such excess.  If the Total Restructuring Fees and Hedge Payments is less than Budgeted Restructuring Fees and Hedge Payments, the December 31, 2014 mandatory amortization payment will be increased dollar for dollar.

Collateral

 

 

 

Subject only to liens securing the Banco Internacional facility, the Vendor Financing (as defined below) and certain additional permitted liens to be agreed, first priority liens on the collateral that currently secures the Existing Notes and such other collateral as may be agreed between the Company and the Informal Group, including, at a minimum, liens on all assets of, and equity in, Camden.

Ranking

Pari passu with all senior unsubordinated indebtedness of the Company; provided that any obligations owed to affiliates or insiders must be unsecured and subordinated in right of payment to the New Notes.

Mandatory Redemptions; Offer to Purchase Upon Change of Control

Substantially the same as under the Existing Indenture, except that the price payable in connection with the Change of Control Offer will be 100% instead of 101%.

Excess Cash Flow

































-  Semi-annual additional principal payments based on Excess Cash Flow.

 

-  For purposes hereof, "Excess Cash Flow" means available cash flow after payment of Base Management Fee (as described below) and all scheduled debt service, including mandatory amortization on the New Notes, the Banco Internacional facility, the Volvo facility and any Vendor Financings, but excluding cash flow to the extent required to maintain a minimum cash balance of $15 million plus the aggregate amount of all accrued but unpaid Management Incentive Fees (as described below).

 

-  100% of the Excess Cash Flow shall be applied semi-annually (based on the reconciled balances on deposit in the Accounts as of the applicable payment date after having given effect to payments for scheduled debt service, operating expenses and other transfers to be made at higher priorities in the waterfall, and subject to a true-up mechanism), starting with the period ending December 31, 2014, to the prepayment of the principal of the New Notes and to the accrual or payment, as applicable, of the Management Incentive Fee (as described below).

 

-  Initially, Excess Cash Flow shall be applied 85% to the prepayment of the principal of the New Notes and 15% to the accrual or payment, as applicable, of the Management Incentive Fee.

-  From and after the earlier of (x) January 1, 2019 and (y) the date that occurs on or after January 1, 2018 if the principal amount of the New Notes is less than $200 million, after taking into account the mandatory amortization, but not the Excess Cash Flow sweep, for the applicable Management Incentive Fee payment date, and in each case until the latest termination date of the Qualifying Concession Extensions or the new or further extended Concession Agreements described in the "Future Concessions" section below, the Excess Cash Flow shall be applied 75% to the prepayment of the principal of the New Notes and 25% to the accrual or payment, as applicable, of the Management Incentive Fee.

 

-  In all cases, the payment of the Management Incentive Fee shall be subject to compliance with the conditions, and subject to the limitations, described in the "Management Incentive Fee" section below.

-  Excess Cash Flow applied to the prepayment of the principal of the New Notes will be applied first to the amount due at final maturity and then to reduce mandatory scheduled amortizations in inverse order of maturity.

Optional Redemption

All or part of the New Notes may be redeemed at a price equal to 100% of the principal amount (plus accrued and unpaid interest to the date of redemption) by the Company and the Guarantors at any time, without payment of any premium.

Observation Rights























The Informal Group will have the right to designate one individual (the "MTT Observer") to attend all meetings with the Ministry of Transport and Telecommunications (the "MTT") that occur after August 18, 2014 in which (x) the General Manager, General Counsel or other executive officer of Alsacia and/or Express is present and (y) there is any discussion of any modification of either Concession Agreement.  Furthermore, on a monthly basis, the Company shall provide the MTT Observer with a written summary of any discussions with MTT officials relating to or impacting the Concession Agreements and/or the underlying concessions. 

 

In addition, the Noteholders will have the right to appoint one individual as a non-voting observer (the "Board Observer") to the Board of Directors of each of Alsacia and Express (each a "Board").  The Board Observer will have the right (a) to inspect the Company's books and records at reasonable times and upon reasonable notice and (b) to attend all meetings of the Board and its committees.  At the same time that such materials are delivered to the members of the Board or any committee, the Board Observer shall receive, (i) notice of a Board or committee meeting, as applicable, setting forth the subject(s) to be discussed, via e-mail, and (ii) hard copies of any such notice and any related documents.  The Company and the Informal Group will discuss the potential phasing out of the roles of the MTT Observer and the Board Observer.

 

Both the MTT Observer and the Board Observer shall be reasonably acceptable to the Company and shall enter into customary confidentiality agreements with the Company, which, for the avoidance of doubt, will permit the MTT Observer and Board Observer to speak with any member of the Informal Group or other holder of the New Notes who agrees to be bound by a confidentiality agreement with the Company in a form agreed by the Company and such holder of New Notes.  The Company and the Informal Group shall agree on any reasonable and customary fees payable by the Company to the MTT Observer and Board Observer.   

Future Concessions






















Prior to the expiration of each of the Concession Agreements of each of Alsacia and Express (whether or not the Qualifying Concession Extensions are obtained), each of Alsacia and Express, as the case may be, will bid in the public bid process conducted by the Chilean government to award the right to operate, upon the expiration of the applicable Concession Agreement, the concession that such entity then operates.  Furthermore, if the Chilean government does not conduct a public bid process prior to the expiration of any Concession Agreement and is open to negotiating a "direct deal" with Alsacia or Express, as applicable, for the concession then operated by such entity, such entity will negotiate with the government in good faith to obtain a new or further extended Concession Agreement through a "direct deal."  For the avoidance of doubt, Alsacia and Express shall have no obligation to submit a bid in a process that would require as a condition of the bid further capital contributions by the shareholders or any actions or omissions that would otherwise be prohibited by the terms of the New Notes; provided, however, that if a condition of the bid would require an action by the Company that would otherwise be prohibited by the terms of the New Notes Indenture (as defined below), Alsacia shall use commercially reasonable efforts to solicit consents from the requisite percentage of holders of the New Notes to allow such action, but shall have no obligation to pay any consent fee or other consideration in connection with any such consent solicitation in excess of a maximum consent fee to be agreed by the Company and the Informal Group.

 

If each of Alsacia and Express obtains a Further Concession Extension with a termination date of April 22, 2023 or later, the Company will pay the shareholders a one-time fee in the amount of $3 million for each year of extension beyond 2021 on or after the later to occur of (a) the commencement of operations by each of Alsacia and Express under such new or further extended Concession Agreements and (b) October 22, 2021.

Covenants



































The indenture for the New Notes (the "New Notes Indenture") will contain affirmative and negative covenants similar to those in the Existing Indenture, except as described below:

-  the New Notes Indenture will not include any financial covenants requiring compliance with debt service coverage or other financial maintenance ratios;

 

-  the New Notes will not contain any Early Amortization Events;

 

-  the New Notes will contain a covenant requiring that the Company maintain cash in an amount that is not less than $5 million and not more than $15 million measured as of each Excess Cash Flow payment date (i.e., semi-annually); provided that, if the payment of any Base Management Fee or Management Incentive Fee would drop the Company's cash balance below $5 million, such payment will be postponed until the Company can make such payment in compliance with this covenant;

 

-  the negative covenants will not contain incurrence-based exceptions and will be subject to specified, limited baskets, including as follows:

 

-   dividends, distributions and other direct and indirect restricted payments (including transactions with affiliates) will be limited to the payment of the Base Management Fee and the Management Incentive Fee;

 

-   permitted indebtedness will be limited to (i) indebtedness incurred for the financing of new buses and other essential concession assets to the extent required by any Qualifying Concession Extension ("Vendor Financing") not to exceed an amount to be agreed among the Company and the Informal Group and (ii) a basket for currency hedges in respect of a principal amount of New Notes not to exceed an amount to be agreed among the Company and the Informal Group (the "New Hedges");

 

-   permitted liens will include (i) existing liens securing the Banco Internacional facility and (ii) liens on acquired buses securing the Vendor Financing.  The New Hedges, if any, shall share in the liens securing the New Notes on an equal and ratable basis; and

 

-   ability to make incremental Capital Expenditures, including Capital Expenditures required in connection with any Qualifying Concession Extension, will be limited to amounts to be agreed among the Company and the Informal Group.

Events of Default

Substantially the same as under the Existing Indenture.

Amendments and Waivers

Substantially the same as under the Existing Indenture, except that the Company shall be permitted to extend the maturity in the event of a Qualifying Concession Extension and a Further Concession Extension without the consent of the holders of the New Notes solely as described in the "Maturity" section above. 

Securities Law Matters

Exemption for issuance of New Notes to be discussed among counsel to the Informal Group and counsel to the Company.

Non-Compete
























On the effective date of the New Notes, Carlos Mario Rios Velilla, Francisco Javier Rios Velilla and each of their respective spouses will execute and deliver a non-compete agreement (each a "Non-Compete Agreement") that provides that, during a period from the date of such Non-Compete Agreement until the Termination Date (as defined below), none of Carlos Mario Rios Velilla, the spouse of Carlos Mario Rios Velilla, Francisco Javier Rios Velilla, the spouse of Francisco Javier Rios Velilla, any member of their respective families (e.g.,  their children, parents, brothers, uncles, aunts and cousins) nor any affiliate of any of the foregoing (the "Restricted Parties") will, directly or indirectly: (i) engage in or assist others in engaging in any business activity relating to the bus  routes in the Santiago, Chile metropolitan area, including, without limitation, operating any such bus routes (collectively, the "Restricted Business"), (ii) have an interest in any entity that engages directly or indirectly in the Restricted Business in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant, or (iii) knowingly interfere in any material respect with the business relationships (whenever formed) between the Company and customers or suppliers of the Company; provided that, subject to compliance with its obligations under the New Notes Indenture, no Restricted Party shall be prohibited from bidding and/or negotiating for additional bus related concessions to be operated solely by Alsacia, Express or a wholly-owned subsidiary of Alsacia or Express and, if successful in such bid(s) and/or negotiation(s), operating such concessions solely through Alsacia, Express or a wholly-owned subsidiary of either Alsacia or Express (which subsidiary shall be a Guarantor of the New Notes and a Restricted Subsidiary under the New Notes Indenture). The Non-Compete Agreement will terminate upon the earlier to occur of (a) three years following the termination date of the Concession Agreement that terminates last (including after giving effect to any Qualifying Concession Extension), and (b) the repayment in full in cash of all principal and interest on, and all other obligations under, the New Notes and the New Notes Indenture (such date, the "Termination Date"). 

Shareholder Support Agreement

The Amended and Restated Sponsor Support Agreement dated October 10, 2013 (the "Shareholder Support Agreement") will be terminated and of no further force and effect.

Releases; Termination

 

 

 

-  Customary releases for Company directors, officers and shareholders and their legal counsel and financial advisors, other than for losses resulting from gross negligence, fraud, willful misconduct or criminal activity.

 

-  Customary releases for the members of the Informal Group and their legal counsel and other professional advisors, other than for losses resulting from gross negligence, fraud, willful misconduct or criminal activity.

Conditions to Closing











-  Implementation through a U.S. prepackaged Chapter 11 plan.

 

-  Successful confirmation of Chapter 11 plan; execution of a new indenture consistent with this Term Sheet.

 

-  Completion of satisfactory due diligence, and including review of scope of collateral and guarantees.

 

-  Participation of holders holding a percentage of Existing Notes acceptable to the Company and the Informal Group.

 

-  Payment of any fees and expenses due and owing to the Informal Group's advisors, including, without limitation, The Blackstone Group, Akin Gump Strauss Hauer & Feld, LLP, Carey y Cia., Ltd. and Pablo Rodriguez in accordance with their executed engagement letters.

Management Fees

Base Management Fee







Annual fee of $2.25 million (a pro rata portion of which shall be payable on account of any other partial year), payable semi-annually, in arrears, subject to (i) the prior payment of all debt service required under the New Notes Indenture and (ii) the prior execution and delivery of, and continuing compliance by the Restricted Parties with their obligations under, the Non-Compete Agreement; provided that, starting with the year in which the Qualifying Concession Extension is obtained, the annual fee for such year and each year thereafter shall be increased to $2.75 million.  Notwithstanding anything herein to the contrary, if the closing of the transactions contemplated by this Term Sheet occurs on or prior to December 31, 2014, the Base Management Fee payable in respect of the fourth quarter of 2014 shall not be prorated and, in any event, shall be $565,200.  Base Management Fees during a Further Concession Extension to be agreed by the Company and the Informal Group.

Management Incentive Fee








































On a semi-annual basis starting with the period ending December 31, 2014, a Management Incentive Fee equal to the product of Excess Cash Flow for such semi-annual period and 15%, increasing to 25% (for any Management Incentive Fee payment date after the earlier of (x) January 1, 2019 and (y) the date that occurs on or after January 1, 2018 on which the principal amount of the New Notes is less than $200 million after taking into account the mandatory amortization, but not the Excess Cash Flow sweep, for such payment date) will accrue and, subject to satisfaction of the payment conditions described below, vest and be paid to the Company's shareholders; provided that the Management Incentive Fee accrued and/or paid in respect of any calendar year cannot exceed (i) $3.25 million until the earlier of (x) October 21, 2021 and (y) the date that occurs on or after January 1, 2018 on which the principal amount of the New Notes is less than $200 million and (ii) thereafter, $5.0 million; provided that, if the cap increase occurs on any date other than the first day of the year, the cap for such calendar year will be calculated on a pro-rata basis taking into account the number of days that each cap was in effect during such calendar year.  The Management Incentive Fee (including any accrued but unpaid Management Investment Fee payments) shall vest and be paid to the Company's shareholders once the Company obtains the Qualifying Concession Extensions; provided that any Management Incentive Fee accrued, but not paid, in respect of any period prior to obtaining the Qualifying Concession Extensions ("Catch-Up Fees") shall be paid promptly after obtaining such Qualifying Concession Extensions; provided, further, that no Management Incentive Fee will be paid to the Company's shareholders if any Restricted Party has breached, or is currently in breach of, his, her or its obligations under the Non-Compete Agreement.  For the avoidance of doubt, Catch-Up Fees may be paid immediately following a Qualifying Concession Extension, subject to the Restricted Parties' compliance with the Non-Compete Agreement.

 

On each date on which Excess Cash Flow payments are made, the Company shall deliver an Officers' Certificate attaching a calculation of Excess Cash Flow for the relevant period (based on the reconciled balance on deposit in the Accounts as of the applicable payment date after having given effect to payments for scheduled debt service, operating expenses and other transfers to be made at higher priorities in the waterfall), and certifying that the Company has complied, and is in compliance, with all requirements for the payment of the Management Incentive Fee or, if the Company has not so complied, setting out the amount that has been accrued for such period in respect of the Management Incentive Fee.  In addition, on each date on which a Management Incentive Fee payment is to be made, the Company shall deliver a certificate of each of Carlos Mario Rios Velilla and Francisco Javier Rios Velilla certifying that he, his family members and his respective affiliates have complied, and are in compliance, with their obligations as described in "Non-Compete" section above.

 

If (a) a bankruptcy case or insolvency proceeding involving any of the Companies is commenced prior to the Company obtaining the Qualifying Concession Extensions or (b) the Company fails to obtain the Qualifying Concession Extensions on or prior to the maturity of the New Notes, all accrued but unpaid Management Incentive Fees as of such date shall be forfeited and the Company shall have no obligation or right to pay such Management Incentive Fees to the Company's shareholders.

Method of Fee Payment




Unless structuring the management fees in the manner described herein is likely to have a material adverse effect on the Company, the Base Management Fee and the Management Incentive Fee may be structured as dividends payable to the Company's shareholders and/or redemptions or repurchases of or reductions in the Company's capital stock; provided that, if the payment of the Base Management Fees or Management Incentive Fees to the Company's shareholders is ever subject to withholding, the Company will not have an obligation to, and will not, gross-up the amount of such Base Management Fees or Management Incentive Fees.

Camden

 

Subject to completion of satisfactory due diligence, obligations owing to Camden to be payable in the ordinary course of business.

 

1  Capitalized terms used but not defined in this letter shall have the meanings ascribed to such terms in the Indenture.

2  Note – Upon satisfaction of the conditions specified in the relevant Concession Agreement, each concession may be extended for a period of up to 36 months from October 22, 2018 (i.e., the original termination date of each concession).

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