Cognis completes recent refinancing by replacing remaining PIK notes
Remaining PIK notes redeemed and refinanced by a new PIK loan of 362 million euros
Cognis has continued to optimize its financial structure. With this latest step the global specialty chemicals company redeemed its outstanding PIK (Pay In Kind) notes worth approximately 348 million euros (including accrued interests), and replaced them with a new PIK loan worth 362 million euros (covering also fees and expenses connected with the transaction), repayable in 2015. By this transaction, Cognis' financing costs will be reduced further by 14 million euros per year from 2008 on. The coupon on the old PIK notes was 9 percent above Euribor, and this would have risen to 11 percent above Euribor in 2008. In contrast, the interest rate on the new PIK loan is 7 percent above Euribor, with a possible increase in 2010, if Cognis exceeds a certain leverage ratio at that time.
This transaction follows the refinancing of Cognis' senior bank financing and second-lien debt and the earlier partial repayment of the PIK notes. In May 2007, Cognis issued notes and borrowed loans with a total value equivalent to 1.65 billion euros. The total value of both stages of the refinancing operation is approximately 2 billion euros. As a result, Cognis has achieved a considerable reduction in financing costs and improved its liquidity position going forward. The total interest saving will be about 74 million euros per year. Due to the fact that there is no scheduled amortization on the new financing instruments, the company expects to see a net cash gain of approximately 100 million euros per year.
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