The announcement that Tetra Tech’s takeover has been declared unconditional which allows investors to sell their bonds at 101%. We outline the options for bondholders
On 15 January, Coffey International announced
that Tetra Tech’s off-market takeover offer was declared unconditional. This sets in motion a discrete timeline of events which allow investors’ in Coffey’s senior unsecured bonds to exercise a change of control put at 101% of par. A summary of these developments and the associated timelines follow.
Takeover unconditional
In an announcement to the ASX, the takeover offer launched by Tetra Tech in October last year was declared unconditional. Since this announcement, Tetra Tech has advised that it holds relevant interests in over 90% of all Coffey shares and has commenced compulsory acquisition of the remaining shares.
It has also been announced that the Coffey Board of Directors has been replaced with three senior Tetra Tech executives: Dan Batrack, Ron Chu and Lachlan Walker. Mr Chu has also been appointed Chief Executive Officer.
Options for bondholders
Now that the takeover has been successful, Coffey bondholders have several options:
- Under the change of control condition they are able to sell their bonds back to the company at 101% of face value plus accrued interest
- Continue to hold the bonds which have call dates of September 2017 at 103% or September 2018 at 101.5% of par before maturity in September 2019
In its Second Supplementary Bidders Statement released on 18 January, Tetra Tech advised its ‘current intention is to identify, evaluate and pursue suitable opportunities to reduce the existing debt of the Coffey Group, and to better integrate the businesses of Tetra Tech and Coffey from a structural/ operational perspective.’
Significantly, regardless of what initiatives Tetra Tech and Coffey undertake to achieve this goal, bondholders will retain their right to put the bonds under the change of control conditions.
Change of control put mechanics
Under the conditions of Coffey’s senior unsecured bonds, a change of control occurs at the point at which a new owner holds more than 50% of the issued shares. This will be satisfied once settlement of the acquisition occurs, which must be completed no later than 15 February.
Once a change of control has occurred, Coffey must give notice to investors within 30 days that they have a right to sell their bonds back to Coffey at 101% of par. The redemption date on which Coffey must buy bonds back must be set between 30 and 50 days from the day this notice is given. Accordingly, the redemption date for these notes will be between 16 March and 5 May.
This timeline is summarised in the table below.
| Date | Event |
| Friday, 15 January 2016 | Takeover Declared Unconditional |
| Monday, 15 February 2016 | Change of Control Occurs |
| Monday, 15 February 2016 | Earliest Date for Change of Control Notice |
| Wednesday, 16 March 2016 | Deadline for Change of Control Notice |
| Wednesday, 16 March 2016 | Earliest Date for Redemption |
| Thursday, 5 May 2016 | Latest Date for Redemption |
Indicative sales price of the bonds is $102.20*.
Previous updates regarding this transaction are:
Coffey Board recommends $0.425 cash per share takeover offer by Tetra Tech Coffey - Bidder/Target statement released 90% minimum acceptance condition will likely be achieved *Accurate as at 20 January 2016 but subject to change.