USEC Reaches Deal With Noteholder Group; Expects To File For Bankruptcy In Q1

(RTTNews) - USEC Inc. (USU) said Monday that it 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.

As per 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.

The company said it 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.

USEC noted that discussions continue with the Babcock & Wilcox Investment Company (B&W) and Toshiba Corp. (TOSBF.PK) 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. 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, the company said.

In order to implement the terms of the agreement, USEC 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.

Recently, USEC 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 or 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 said it is currently in ongoing discussions with DOE officials regarding the American Centrifuge project and the proposed restructuring.

As per 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 company expects B&W and Toshiba to continue to have representation on the board of directors.