Timminco Limited
TSX : TIM

Timminco Limited

December 15, 2010 16:00 ET

Timminco Announces Updates on Credit Facilities

TORONTO, ONTARIO--(Marketwire - Dec. 15, 2010) - Timminco Limited ("Timminco") (TSX:TIM) announced today several updates to the credit facilities for Timminco and its wholly- owned subsidiary, Bécancour Silicon Inc. ("Bécancour Silicon" and, collectively with Timminco, the "Company"), as described in more detail below. In summary, these updates include:

  1. Bécancour Silicon has executed a Loan and Security Agreement with Bank of America, N.A., Canada branch, as agent ("Bank of America"), which provides for a new $20.0 million three-year revolving credit facility (the "Senior Credit Facility") and replaces the Company's revolving credit facility that expired today.

  2. The conditions for an eight-year extension of the maturity date of Bécancour Silicon's $25.0 million term loan due to Investissement Québec (the "IQ Term Loan") have now been satisfied in full.

  3. The US$5.0 million senior subordinated convertible promissory note issued by Bécancour Silicon in December 2009 to AMG Advanced Metallurgical Group N.V. ("AMG") has been amended and restated effective today (the "AMG Convertible Note") to facilitate the completion of the Senior Credit Facility.

"In aggregate, today's announcements provide the Company with additional financial strength and flexibility as we continue to pursue opportunities in both our silicon metal operations and our solar grade silicon operations," said Robert J. Dietrich, Executive Vice President – Finance and Chief Financial Officer of Timminco.

In addition, Timminco announced that Québec Silicon Limited Partnership ("Québec Silicon") has received $5.0 million of additional debt financing from its equity holders to support on-going working capital requirements. Each of Bécancour Silicon, which owns a 51% equity stake, and a subsidiary of Dow Corning Corporation, which owns a 49% stake, have advanced their pro rata portion to Québec Silicon. Such debt financing is repayable in full by the end of the first quarter of 2012 and is in addition to the existing $10.0 million revolving credit facility provided by Dow Corning Corporation to Québec Silicon.

Senior Credit Facility

The Senior Credit Facility, which terminates on December 15, 2013, consists of a revolving credit facility of up to $20.0 million, subject to a borrowing base. Bécancour Silicon may borrow in US dollars or Canadian dollars, as prime rate loans, base rate loans, LIBOR loans or BA equivalent loans, and may use the Senior Credit Facility to refinance existing indebtedness, issue standby or commercial letters of credit, and finance on-going working capital needs. Amounts borrowed as prime rate loans under the Senior Credit Facility will bear interest at the Canadian prime rate plus an applicable margin of 2.75%, subject to adjustment.

Availability under the Senior Credit Facility is equal to the borrowing base minus the aggregate outstanding amounts borrowed under such facility, which is currently nil, any borrowing base reserve applied from time to time, and the amount of the availability block, which is currently $5.0 million. The borrowing base continues to be based on the value of the Company's inventories and receivables, subject to caps on the advance rates and eligibility criteria.

The Company is required to maintain certain minimum EBITDA levels, on a cumulative year-to-date basis as at each month end, and to restrict capital expenditures to certain maximum levels, also on a cumulative year-to-date basis as at each month end, throughout the term. The Company is also subject to restrictions on distributions and dividends, acquisitions and investments, asset dispositions, indebtedness, liens and affiliate transactions.

The Senior Credit Facility does not have a minimum fixed charge coverage ratio covenant. However, in the event that the Company achieves a certain minimum fixed charge coverage ratio, the availability block will be reduced to $2.0 million and, depending on the extent and timing of any improvements in such ratio, the applicable margin on the interest rate, as well the unused line fees payable under the Senior Credit Facility, will also be reduced.

The Company's assets including Bécancour Silicon's equity interests in Québec Silicon, continue to be pledged as security for the Company's obligations under the Senior Credit Facility. Accounts receivable are required to be forwarded to a lockbox or deposited in a blocked account, and Bank of America will have the ability to exercise cash dominion if excess availability is less than $5.0 million or upon the occurrence of a default. Timminco has also guaranteed all obligations of Bécancour Silicon under the Senior Credit Facility.

The other terms and conditions of the Senior Credit Facility are substantially the same as those that applied under the former revolving credit facility, as amended on September 30, 2010.

IQ Term Loan

On September 30, 2010, Investissement Québec ("IQ") conditionally agreed to an extension of the maturity date of the IQ Term Loan, from August 31, 2011 to July 16, 2019, and certain other amendments, subject to the execution of an acceptable new revolving credit facility for the Company. IQ has accepted the amount and other terms of the Senior Credit Facility and, accordingly, such condition has been satisfied.

The IQ Term Loan is repayable in fixed, consecutive monthly installments of $175,000, starting on August 31, 2012, and additional annual installments, due on June 30 of each year, in amounts based on a percentage of Bécancour Silicon's defined adjusted cash flow for the preceding fiscal year, starting on June 30, 2013. The first annual installment will be 12.5% of such adjusted cash flow for fiscal year ended December 31, 2012, and each annual installment thereafter will be 30% of such adjusted cash flow. As well, Bécancour Silicon is obligated to remit half of any future earn-out payments received from Dow Corning Corporation as repayment under the IQ Term Loan.

IQ continues to have a charge upon Bécancour Silicon's assets, subordinated to the charges granted by the Company under the Senior Credit Facility. Timminco has guaranteed all obligations of Bécancour Silicon under the IQ Term Loan.

AMG Convertible Note

AMG, a significant shareholder in Timminco whose head office is located at Strawinskylaan 1343, Toren C 1077 XX Amsterdam, The Netherlands, has agreed to extend the maturity date of the AMG Convertible Note by three years, from January 3, 2011 to January 3, 2014. The outstanding principal amount of the AMG Convertible Note will bear interest at 14%, payable monthly in arrears, starting on January 31, 2011.

The AMG Convertible Note is repayable, in whole or in part and without penalty, at Bécancour Silicon's option, to the extent that the availability under the Senior Credit Facility exceeds $5.0 million, both during the 90 days before and immediately after such repayment, provided that the Company has also satisfied a minimum fixed charge coverage ratio, over the previous 12 months and on a pro forma basis after giving effect to such repayment, and is also not in default under the Senior Credit Facility. Bécancour Silicon is also required to pay AMG, as a partial or whole prepayment of the principal amount due under the AMG Convertible Note and on a quarterly basis, an amount equal to either: (i) one half of the availability under the Senior Credit Facility in excess of $5.0 million, where the principal amount then outstanding is greater than such excess availability amount; or (ii) all of the principal amount then outstanding, where such principal amount is less than the amount of availability under the Senior Credit Facility in excess of $5.0 million. In each case, such prepayment is subject to any prior exercise of AMG's conversion right, as well as satisfaction of the other conditions in respect of optional prepayments.

Up to the full principal amount of the AMG Convertible Note is convertible into common shares of Timminco ("Common Shares"), at AMG's option at any time during the extended term at a conversion price of $0.26 per share, subject to customary anti-dilution adjustments, with the US dollar principal amount converted into Canadian dollars at the Bank of Canada's noon exchange rate on the date of notice of conversion. This new conversion price represents a discount of approximately 21% from the market value of a Common Share, as determined pursuant the Toronto Stock Exchange ("TSX") definitions, namely, the volume weighted average trading price of such shares on the TSX on the last five trading days up to and including December 14, 2010. Based on the Bank of Canada's noon exchange rate for U.S. to Canadian dollars on December 14, 2010, the number of Common Shares issuable to AMG upon exercise in full of its conversion right under the AMG Convertible Note would be approximately 19.3 million Common Shares, representing approximately 9.9% of the current total issued and outstanding Common Shares. AMG currently owns approximately 83.1 million Common Shares, representing approximately 42.5% of Timminco's current outstanding share capital. Assuming the full conversion of the AMG Convertible Note on this basis, AMG would own approximately 102.5 million Common Shares, representing approximately 47.6% of Timminco's then outstanding share capital.

The AMG Convertible Note continues to have financial reporting covenants, a negative debt covenant, certain capital expenditure approval requirements and a cross-default provision in respect of existing secured indebtedness. Timminco also continues to guarantee all obligations of Bécancour Silicon under the AMG Convertible Note.

The pricing and other terms of the AMG Convertible Note have been reviewed and approved by the designated independent members of the boards of directors of Timminco. The TSX has conditionally approved the AMG Convertible Note, subject to receipt of customary documentation. A copy of the early warning report to be filed by AMG, pursuant to applicable securities legislation, will be available via the SEDAR website at www.sedar.com under Timminco's profile.

About Timminco

Timminco produces silicon metal for the chemical (silicones), aluminum and electronics/solar industries, through its majority owned production partnership with Dow Corning, known as Québec Silicon. Timminco is also a producer of solar grade silicon, using its proprietary technology for purifying silicon metal, for the solar photovoltaic energy industry, through its wholly owned subsidiary Bécancour Silicon.

Cautionary Notes

This news release contains "forward-looking information," as such term is defined in applicable Canadian securities legislation, concerning Timminco's future financial or operating performance and other statements that express management's expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "believes", "anticipates", "budget", "scheduled", "estimates", "forecasts", "intends", "plans" and variations of such words and phrases, or by statements that certain actions, events or results "may", "will", "could", "would" or "might" "be taken", "occur" or "be achieved". In this news release, such information includes statements regarding terms and events in respect of the Senior Credit Facility, the IQ Term Loan and the AMG Convertible Note.

Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets, in which Timminco operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies. Timminco cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Timminco's actual results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to: liquidity risks; foreign currency exchange rates; equipment failures, downtime or inefficiencies; dependence upon power supply for silicon metal production; pricing and availability of raw materials; global economic conditions; credit risk exposure; selling price of silicon metal; customer concentration; transportation delays and disruptions; class action lawsuits; contract termination claims; interest rates; future growth plans and strategic objectives; environmental, health and safety laws and liabilities; conflicts of interest; limited history with the solar grade silicon business; selling price of solar grade silicon; customer commitments; production cost targets; achieving and maintaining quality of solar grade silicon; customer capabilities in producing ingots; protection of intellectual property rights; production capacity expansion at the Bécancour facilities; closure of the magnesium facilities; investment in Applied Magnesium; insurance costs; government and economic incentives; dependence upon key executives and employees; completion and integration of potential acquisitions, partnerships or joint ventures; intellectual property infringement claims; and climate change. These factors are discussed in greater detail in Timminco's Annual Information Form for the year ended December 31, 2009, and in Timminco's most recent Management's Discussion and Analysis, each of which is available via the SEDAR website at www.sedar.com. Although Timminco has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on forward-looking information. The forward- looking information in this news release is made as of the date of this news release and Timminco disclaims any intention or obligation to update or revise such information, except as required by applicable law.

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Contact Information

  • Timminco Limited
    Robert Dietrich
    Executive Vice President - Finance and CFO
    (416) 364-5171
    (416) 364-3451 (FAX)
    rdietrich@timminco.com
    or
    The Equicom Group Inc.
    Lawrence Chamberlain
    (416) 815-0700 ext. 257
    (416) 815-0080 (FAX)
    lchamberlain@equicomgroup.com