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Agreement executed with group of noteholders representing more
than 60% of notes
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Restructuring relates only to parent company USEC Inc.
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USEC to fully meet obligations to customers and suppliers as
operations continue
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Plan restructures balance sheet debt and equity only
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Strong support of agreement by noteholders expected to
accelerate restructuring process
BETHESDA, Md.--(BUSINESS WIRE)--Dec. 16, 2013--
USEC Inc. (NYSE:USU) has reached an agreement with a majority of the
holders of its senior convertible notes on the terms of a financial
restructuring plan that will strengthen the company’s balance sheet,
enhance its ability to sponsor the American Centrifuge project and
improve its long-term business opportunities. Under the terms of the
agreement, the company will replace approximately $530 million in
convertible notes that are scheduled to mature in October 2014 with new
debt and equity.
“We are pleased to reach agreement with a significant number of our
noteholders on a plan to improve our capital structure and enhance our
ability to be a stronger sponsor of the American Centrifuge project,”
said John K. Welch, USEC president and chief executive officer. “We have
said for many months that we are transitioning our business to focus on
our core strengths, and today’s announcement represents another
important step in that process.”
Throughout the restructuring process, USEC expects to continue its
operations and to meet its obligations to its stakeholders, including
suppliers, partners, customers and employees. The company also
anticipates the continuation of research, development and demonstration
activities for the American Centrifuge technology, as well as the
transition activities at the Paducah Gaseous Diffusion Plant by United
States Enrichment Corporation, which is the primary operating subsidiary
of USEC Inc.
Discussions continue with the Babcock & Wilcox Investment Company (B&W)
and Toshiba Corporation regarding agreement to restructure their
preferred convertible equity investment. The noteholders and USEC have
made a proposal regarding restructuring the Toshiba and B&W investment
and the parties are in discussions on those terms and documentation
which must be completed prior to implementing the financial
restructuring plan. As strategic investors, Toshiba and B&W remain
supportive on deployment of the American Centrifuge Plant.
The agreement with the noteholders, which includes the participation of
financial institutions representing approximately 60 percent of the
company’s debt, calls for the company’s $530 million debt to be replaced
with a new debt issue totaling $200 million. The new debt issue would
mature in five years and automatically extend an additional five years
upon the occurrence of certain events. In addition, the restructuring
plan contemplates that the existing equity will be replaced with new
equity. The noteholders would receive 79 percent of the new equity as
common stock. The plan calls for Toshiba and B&W to jointly obtain 16
percent of the new common stock, as well as $40 million in debt on the
same terms as the noteholders, in exchange for their existing preferred
equity investment. Existing stockholders would receive 5 percent of the
new common stock. As noted above, the detailed terms for restructuring
Toshiba and B&W’s preferred equity investment are being negotiated. Once
implemented, the new capital structure will increase USEC’s financial
flexibility and support the company’s continuing sponsorship of the
American Centrifuge project.
In order to implement the terms of the agreement, USEC Inc. expects to
file a prearranged and voluntary Chapter 11 petition for relief in the
United States Bankruptcy Court for the District of Delaware in the first
quarter of 2014. It is anticipated that none of the company’s
subsidiaries will be filing for relief. United States Enrichment
Corporation is anticipated to be a plan proponent for a limited purpose,
but will not be included in the Chapter 11 filing. Such a filing is not
expected to have any effect on on-going operations, suppliers,
deliveries to customers or the American Centrifuge research, development
and demonstration program.
USEC recently announced that its full production-scale cascade of 120
machines achieved 20 machine-years of operations at commercial plant
specifications. During that performance run, USEC successfully completed
three important milestones set by the Department of Energy (DOE) for the
program. DOE’s ongoing support for the project is a condition to
implementing the company’s agreement with its noteholders. The company
is currently in ongoing discussions with DOE officials regarding the
American Centrifuge project and the proposed restructuring.
Under terms of the agreement, the current USEC Board of Directors would
oversee the restructuring process until the effective date of the plan
when a new board would take its place. The new directors will all be
U.S. citizens, except and to the extent that mitigation measures
acceptable to the Nuclear Regulatory Commission and DOE are in place. We
expect B&W and Toshiba to continue to have representation on the board
of directors.
The restructuring plan support agreement and related materials can be
found in an 8-K publicly filed today with the Securities and Exchange
Commission, and is available in the Investors section of the company
website, www.usec.com.
USEC’s legal advisor for the restructuring is Latham & Watkins LLP, its
financial advisor is Lazard, and its restructuring advisor is
AlixPartners LLP. An ad hoc group of holders of USEC's senior
convertible notes was advised by Akin Gump Strauss Hauer & Feld LLP and
Houlihan Lokey.
USEC Inc., a global energy company, is a leading supplier of enriched
uranium fuel for commercial nuclear power plants.
Forward-Looking Statements
This news release contains “forward-looking statements” within the
meaning of Section 21E of the Securities Exchange Act of 1934 - that is,
statements related to future events. In this context, forward-looking
statements may address our expected future business and financial
performance, and often contain words such as “expects”, “anticipates”,
“intends”, “plans”, “believes”, “will” and other words of similar
meaning. Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. For USEC, particular risks and
uncertainties that could cause our actual future results to differ
materially from those expressed in our forward-looking statements
include, but are not limited to: risks related to the ongoing transition
of our business, including uncertainty regarding the transition of the
Paducah gaseous diffusion plant and uncertainty regarding the economics
of and continued funding for the American Centrifuge project and the
potential for a demobilization or termination of the project; our
ability to satisfy the conditions to the restructuring plan support
agreement and complete the proposed restructuring, including our ability
to reach a mutually acceptable agreement with B&W and Toshiba regarding
the treatment of their investment and their willingness to make
additional investments in the American Centrifuge project, and the
potential for termination of the restructuring plan support agreement;
the outcome of current discussions with DOE regarding the American
Centrifuge project and the potential for demobilization or termination
of the American Centrifuge project and of the restructuring plan support
agreement if we do not reach an agreement for continued DOE support
beyond the expiration of the current research, development and
demonstration (“RD&D”) program on January 15, 2014; the impact of a
potential de-listing of our common stock on the NYSE; our ability to
reach an agreement with DOE regarding the transition of the Paducah
gaseous diffusion plant and uncertainties regarding the transition costs
and other impacts of USEC ceasing enrichment at the Paducah gaseous
diffusion plant and returning the plant to DOE; the continued impact of
the March 2011 earthquake and tsunami in Japan on the nuclear industry
and on our business, results of operations and prospects; the impact and
potential extended duration of the current supply/demand imbalance in
the market for low enriched uranium (“LEU”); the impact of enrichment
market conditions, increased project costs and other factors on the
economic viability of the American Centrifuge project without additional
government support and on our ability to finance the project and the
potential for a demobilization or termination of the project;
limitations on our ability to provide any required cost sharing under
the RD&D program; uncertainty concerning the ultimate success of our
efforts to obtain a loan guarantee from DOE and other financing for the
American Centrifuge project or additional government support for the
project and the timing and terms thereof; potential changes in our
anticipated ownership of or role in the American Centrifuge project,
including as a result of the need to raise additional capital to finance
the project; the impact of actions we have taken or may take to reduce
spending on the American Centrifuge project, including the potential
loss of key suppliers and employees, and impacts to cost and schedule;
the potential for DOE to seek to terminate or exercise its remedies
under the RD&D cooperative agreement or June 2002 DOE-USEC agreement;
changes in U.S. government priorities and the availability of government
funding, including loan guarantees; risks related to our inability to
repay our convertible notes at maturity in October 2014 if we are not
successful in implementing the proposed restructuring; risks related to
our ability to manage our liquidity without a credit facility: our
dependence on deliveries of LEU from Russia under a commercial supply
agreement with Russia (the “Russian Supply Agreement”) and limitations
on our ability to import the Russian LEU we buy under the Russian Supply
Agreement into the United States and other countries; risks related to
our ability to sell our fixed purchase obligations under the Russian
Supply Agreement; the decrease or elimination of duties charged on
imports of foreign-produced low enriched uranium; pricing trends and
demand in the uranium and enrichment markets and their impact on our
profitability; movement and timing of customer orders; changes to, or
termination of, our agreements with the U.S. government; risks related
to delays in payment for our contract services work performed for DOE,
including our ability to resolve certified claims for payment filed by
USEC under the Contracts Dispute Act for payment of breach-of-contract
amounts; the impact of government regulation by DOE and the U.S. Nuclear
Regulatory Commission; the outcome of legal proceedings and other
contingencies (including lawsuits and government investigations or
audits); the competitive environment for our products and services;
changes in the nuclear energy industry; the impact of volatile financial
market conditions on our business, liquidity, prospects, pension assets
and credit and insurance facilities; the impact of potential changes in
the ownership of our stock on our ability to realize the value of our
deferred tax benefits; the timing of recognition of previously deferred
revenue; and other risks and uncertainties discussed in our filings with
the Securities and Exchange Commission, including our Annual Report on
Form 10-K and quarterly reports on Form 10-Q. Revenue and operating
results can fluctuate significantly from quarter to quarter, and in some
cases, year to year. We do not undertake to update our forward-looking
statements except as required by law.
Source: USEC Inc.
For USEC Inc.
Investors:
Steven Wingfield, 301-564-3354
or
Media:
Paul
Jacobson, 301-564-3399
