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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35342  
Subject: Re: alon refinery exp tender offer bond redempti Date: 4/25/2012 4:56 PM
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does anyone know what happened here? according to previous reports, many folks were on board with the early voluntary offer. and i was not really exactly sure why, since they had been trading actually slightly higher than the tender offer price amount as much as 10% premium > par.

then out of the blue, it is announced that the voluntary bond redemption is not taking place, the previous offer has expired without any notes being accepted for consent and all the tendered bonds would be returned.


It looks like they weren't able to borrow the money that they were planning on using to repay the notes.

From the 3/15 tender offer itself:

The tender offer and consent solicitation are subject to the satisfaction or waiver of certain conditions, including (a) the receipt by the Company of proceeds from a new financing (the "New Financing," which is presently contemplated to include borrowings by Alon USA Energy, Inc., an indirect parent company of the Company, in an amount up to $700.0 million, to be guaranteed by the Company and secured by security interests in substantially all of the Company's assets, including pari passu security interests in the assets that provide security for the Notes) sufficient to purchase the Notes tendered, including the payment of all consent payments, accrued interest and costs and expenses incurred in connection therewith, (b) the Company having received consents representing at least a majority of the aggregate principal amount outstanding of the Notes ("Majority Consent"), and (c) the other conditions to the tender offer as described in the Offer to Purchase.

Here's an announcement http://phx.corporate-ir.net/phoenix.zhtml?c=190387&p=Rss... from the same day that the tender offer was announced, giving some more information on the financing that it was seeking:

Alon USA Energy, Inc. (NYSE: ALJ) ("Alon" or "the Company") announced today that it has engaged Goldman Sachs Lending Partners LLC to assist it with the arrangement of a secured term loan facility in an aggregate principal amount of up to $700 million. The Company intends to use the proceeds of borrowings under the facility to (1) repay all indebtedness outstanding under its existing term loan facility (approximately $425 million), (2) retire all of the indebtedness represented by the outstanding 13 1/2% senior secured notes due 2014 of its Alon Refining Krotz Springs, Inc. subsidiary (approximately $216.5 million), (3) pay related transaction costs and expenses and debt retirement premiums, and (4) to the extent of any remaining proceeds after the uses described above, for general corporate purposes.

Then, from April 3 - http://www.streetinsider.com/Corporate+News/Alon+USA+(ALJ)+T... this article indicates that they were 'exploring alternatives' to the previously announced loan that they were seeking, and that the new alternatives might not 'satisfy the financing condition for the previously announced tender offer'.

The Company also announced that it is exploring financing alternatives with respect to its previously announced plans to arrange a new secured term loan facility, and that certain of the potential financing alternatives for this new facility would not satisfy the financing condition for the tender offer. The Company's ability to establish a new term loan facility and borrow thereunder will be subject to the receipt of commitments from lenders to provide the facility, the negotiation and execution of definitive loan documents, the receipt of third-party consents, and other conditions.


So, from at least April 3, it's been public knowledge that the tender offer might be in trouble. So, I wouldn't say that the announcement was 'out of the blue' at all.

Lessons to be learned from this.....

- Don't count on a tender offer that's contingent on financing to actually occur
- Where there is a tender offer that's contingent on financing, be on the lookout for more stories about whether the company is actually successful in procuring said financing

AJ
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