TK Aluminum Announces Sale of Certain Assets to Nemak

CARMAGNOLA, Italy, Nov. 2 /CNW/ - TK Aluminum Ltd., the indirect parent of Teksid Aluminum Luxembourg S.à.r.l., S.C.A., announced today it has entered into a definitive agreement to sell certain assets to Tenedora Nemak, S.A. de C.V., a subsidiary of ALFA, S.A.B. de C.V. Under the terms of the agreement,the Company will sell its operations in North America (except for its lost-foam operations in Alabama, which will be retained by the Company), and its operations and interests in South America, China, and Poland.
   
As consideration for the operations being purchased, TK Aluminum will receive $496.8 million in cash, along with a synthetic equity interest in the Nemak business post-closing. At closing, the Nemak business will be recapitalized to have approximately $667 million of debt. After completion of the financing, TK Aluminum Ltd. will hold a synthetic 11.5% equity interest in the Nemak business, subject to downward revision for various indemnities,guarantees, and repayment of a $25 million loan issued in connection with the transaction.
   
Joachim V. Hirsch, CEO of TK Aluminum, said "We are pleased with this transaction. Combining specific plants with Nemak, a world-class automotive supplier, will allow the new company to continue to best support our customers, employees, and their communities in the future. The transaction will also allow us to continue to focus on restructuring our remaining operations in Italy and France."
   
The transaction, which is expected to close during the first quarter of 2007, has been approved by both the Board of Directors of TK Aluminum and by Nemak. Closing of the deal is subject to various conditions, including the receipt by seller of certain consents and waivers from TK Aluminum's
bondholders and other customary conditions, including regulatory approvals.
   
Additionally, in conjunction with the transaction TK Aluminum intends to announce a tender offer and consent solicitation for its 11 3/8% Senior Notes due 2011 at a price of EUR950 per EUR1,000 of notes outstanding (exclusive of early consent fees), a significant premium to their normalized trading price
during the pre-announcement period. Closing of the transaction will be subject to acceptance of the tender offer by a majority of the notes outstanding.
   
In addition to the tender offer, proceeds from the sale will be used to fund the redemption of TK Aluminum's current outstanding debt, including approximately EUR115 million ($147 million) for the senior secured credit facilities (both the first lien revolver and the second lien facility),required repayments under capitalized leases of approximately EUR55 million($71 million), anticipated tax payments as a result of this transaction of approximately EUR20 million ($26 million), and various other
payments,including fees and expenses, totaling approximately EUR32 million ($41 million). Remaining funds will be used to fund the working capital, capital expenditures, operations, and restructuring of the remaining businesses.
   
TK Aluminum Ltd. is committed to support its remaining operations and customers, and, to further this effort, has negotiated the support of Nemak during the reorganization process. As such, Nemak has agreed to provide certain limited assistance to TK Aluminum, including the assumption of at least $7 million in liabilities in connection with the reorganization of the Company's remaining operations. In addition, ALFA has agreed to provide credit enhancement to support up to $42 million of letters of credit in favor of commercial counterparties to replace existing arrangements under the Company's senior credit facility, and the aforementioned loan of $25million. The credit enhancement will be supported by the synthetic equity interest and the loan will be repaid from the synthetic equity interest.
   
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