ESPOO DISTRICT COURT DECISION 15/6061 Department District Judge Tiina Veranen 14/04/2015 HS 13/18141

Transcription

1 1 ESPOO DISTRICT COURT DECISION 15/6061 Department 2.10 District Judge Tiina Veranen 14/04/2015 HS 13/18141 Restructuring Debtor Administrator Matter Talvivaara Mining Company Plc Attorney Pekka Jaatinen Castrén & Snellman Attorneys Ltd PO Box Helsinki, Finland Decision regarding division of the creditors into groups for the purpose of voting in the restructuring of a company Initiated 15 November 2013 DESCRIPTION OF THE MATTER Objections and the Administrator's View By its decision given on 29 November 2013, the Espoo District Court ordered the commencement of the restructuring proceedings of Talvivaara Mining Company Plc and appointed Attorney Pekka Jaatinen as the administrator. On 13 March 2015, the administrator submitted the administrator's supplemented draft restructuring programme to the District Court. The parties to the matter have been reserved an opportunity to declare in writing to the administrator their objections to claims referred to in the draft and to submit to the District Court their statements on the payment programme. The administrator has notified the following on the objections to the claims declared by the creditors: Etelä-Hämeen Osuuspankki has submitted an objection stating that Riihimäen Seudun Osuuspankki has mistakenly been marked as a creditor of Talvivaara Mining Company Plc based on a bond. According to Etelä-Hämeen Osuuspankki's objection, the correct creditor should bes Qualtrain Ahonen Oy, the owner of the book-entry account on which the bond is. According to Etelä- Hämeen Osuuspankki, the discrepancy is due to a technical error of Etelä

2 2 Hämeen Osuuspankki that occurred in connection with the loan in question, but that has subsequently been corrected. The administrator has checked the matter from the register of bondholders maintained by Euroclear Finland Oy. The erroneous information submitted by the creditor has been corrected in the restructuring debt list and payment programme. In its objection, Finnvera Oyj has argued that Talvivaara Mining Company Plc's promissory note loan of EUR 8,001, given as third-party security on the basis of pledges should be added to Finnvera Oyj's restructuring debt. Finnvera is of the opinion that the draft restructuring programme's payment programme should be corrected with respect to Finnvera so that Finnvera's proportional share of the secured debt does not reduce the total amount of Talvivaara Mining Company Plc's liability based on a guarantee as for its own debt. This being the case, the amount of Finnvera Oyj's receivable under unsecured debt should be EUR 50,703, According to Finnvera Oyj, the payment programme concerning secured debt should be corrected so that the proportional share of the EUR 3,000,000 proposed as secured debt payable to Finnvera Oyj should correspond to the proportion of Finnvera Oyj's total receivables to the financiers' total receivables. On this basis, the amount of secured debt payable to Finnvera Oyj would be EUR 1,358, Finnvera Oyj's view is that the section of the draft restructuring programme proposing the set-off of the receivables between Talvivaara Mining Company Plc and Talvivaara Sotkamo Ltd should be changed so the that the calculation would also take into account the other securities granted by Talvivaara Mining Company Plc on behalf of Talvivaara Sotkamo Ltd in addition to the guarantee as for its own debt given by Talvivaara Mining Company Plc and the guarantees as for its own debt given by Talvivaara Sotkamo Ltd now accounted for in the calculation. Finnvera Oyj finally argued that a clause should be added to the draft restructuring programme stating that creditors are entitled to allocate payments received from guarantors or third-party pledges to their claims as they see fit. As regards Finnvera's argument that Talvivaara Mining Company Plc's promissory note loan of EUR 8,001, given as third-party security on the basis of pledges should be added to Finnvera Oyj's restructuring debt, the administrator stated that Talvivaara Mining Company Plc has given third-party pledges as security for Finnvera's bond from Talvivaara Sotkamo Ltd. This is a liability referred to in section 3(2) of the Restructuring of Enterprises Act, and it is subject to the same rules as the secured and business mortgage debt of Talvivaara Mining Company Plc. Finnvera's claim has been added to the liabilities to be accounted for in the Company's draft restructuring programme. The administrator has accepted Finnvera's objection with respect to the ratio of the claim secured by collateral and the claim based on a guarantee as for its own debt. As regards Finnvera's argument that creditors are entitled to allocate payments received from guarantors or third-party pledges to their claims as they see fit, the administrator's view was that the creditors are entitled to allocate payments from guarantors or third-party pledges to their claims as they see fit. The administrator deemed that it is not necessary to add the demanded addition to the draft restructuring programme.

3 3 On 12 March 2015, Finnvera cancelled its remaining claims that it had declared in its objection. Kirsti Takki has stated that she no longer has any claims from Talvivaara Mining Company Plc due to the sale of her share of the bond. The administrator has accepted this objection and removed Kirsti Takki from the Company's list of restructuring creditors. In its objection, Majakka Voima Oy has argued that its restructuring debt from Talvivaara Mining Company Plc is EUR 110,754.35, which deviates from the draft restructuring programme. The discrepancy is due to a payment made by Talvivaara Mining Company Plc allocated to the share of Majakka Voima Oy's claim relating to the time following the filing of the restructuring application. The administrator has accepted Majakka Voima Oy's objection and has taken Majakka Voima Oy's restructuring debt into account in the draft restructuring programme in the amount of EUR 110, Talvivaara Sotkamo Ltd has submitted an objection stating that it has EUR 188, of intra-group accounts payable from Talvivaara Mining Company Plc that must be considered restructuring debt. Said debt has not been taken into account in the draft restructuring programme. The administrator, having heard Talvivaara Mining Company Plc in the matter, accepted Talvivaara Sotkamo Ltd's objection and added the EUR 188, account claim from Talvivaara Mining Company Plc to the restructuring debt of Talvivaara Sotkamo Ltd. The Company has significant claims from Talvivaara Sotkamo Ltd. Opposing claims can be set off. Despite its status as restructuring debt, the claim stated by Talvivaara Sotkamo Ltd in its objection will not be allocated any payments in the draft restructuring programme. VTT Technical Research Centre of Finland has submitted an objection according to which interest for late payment amounting to EUR 30,82 for the period of 09/11/ /11/2013 must be added to its restructuring debt. The administrator has accepted this objection and corrected VTT Technical Research Centre of Finland's restructuring debt in the manner stated by VTT Technical Research Centre of Finland. Statements Sinikka and Taisto Schroderus have brought a claim for damages due to pollution of the water body and noise and dust disturbances caused by the Talvivaara mining activities and the resulting impairment of the value of the property owned by Mr and Mrs Schroderus, disturbance to recreational use and harm to fishing. Mr and Mrs Schroderus have not given any loans or debt to Talvivaara Sotkamo Ltd. Mr and Mrs Schroderus have objected the restructuring proceedings and demanded that the mining operations be terminated in a controlled manner with a view on environmental matters and that the damages be paid in full. Raimo Laakia has declared that he does not approve the cutting of the restructuring debts by 99%, the cancellation of the debt, or the draft restructuring programme of the administrator. Laakia has proposed that the restructuring debt be frozen for 10 years as a non-interest bearing debt. Talvivaara has large nickel reserves. The bondholders made it possible that these reserves could be started to be utilised. The loan was used to build osmosis facilities that were intended to solve the waste water problem. The nickel reserves, the excavation and the plant have not ceased to exist, nor the debts of the bondholders.

4 4 Praxis Oy has expressed a wish that the bonds be converted into shares in the company in the restructuring proceedings. Atradius Credit Insurance N.V. has declared that the guarantee given by Talvivaara Mining Company Plc as a counter-obligation against the guarantee given by Atradius is an 'on-first-demand' guarantee and not a guarantee as for its own debt. Atradius has demanded that the draft restructuring programme be adjusted so that the counter-obligation given by Talvivaara Mining Company Plc to Atradius be defined as an on-first-demand guarantee in the draft restructuring programme. Ellipsis Asset Management has declared that one of its funds, Ellipsis European Convertible Fund, has a total of 122 bonds of Talvivaara. Mandatum Life Insurance Company has deemed that the supplemented draft restructuring programme dated 13 March 2015 meets the conditions set for the draft restructuring programme in the Act of Restructuring of Companies. Mandatum Life Insurance Company has stated that Talvivaara Sotkamo Oy was declared bankrupt on 6 November Nevertheless, the cash position of Talvivaara Mining Company Plc, which is undergoing restructuring proceedings, is stable, and the company has been able make its payments during the restructuring proceedings. According to a press release published on 12 March 2015, Talvivaara Sotkamo Ltd's bankruptcy estate has signed a conditional agreement for the sale of the mining business to Audley Capital Advisors LLP. A material part of the business operations of Talvivaara Mining Company Plc consist of services meeting the needs of the Talvivaara mine. Given this, the sale of Talvivaara Sotkamo Ltd's business operations to a new owner that is able to run the business in a sustainable and profitable way is vital for the success of the restructuring programme. The administrator of Talvivaara Mining Company Plc has declared that he has not yet entered into detailed negotiations with Audley, but efforts will be made to bring Talvivaara's cash flow to a sufficient level, in accordance with the conditions set for the restructuring programme, on the basis of an agreement to be negotiated with Audley. If these conditions are met, Talvivaara's cash flow will be comprised of the provision of services to the mining business, dividend income or both. The equipment owned by Talvivaara Mining Company Plc, which is necessary for the mining business, and the expertise of its employees are essential to the continuation of mining operations. Utilising these assets of Talvivaara in the company's business will result in a more favourable outcome for the creditors compared to the disbursement that would accrue to the creditors in bankruptcy, provided that the requirements of the restructuring programme are met. The administrator's draft restructuring programme includes an opportunity for the unsecured creditors to convert their restructuring debt into shares in Talvivaara. This arrangement gives the creditors the opportunity to benefit from a potential future appreciation of Talvivaara's shares. At the same time, the arrangement will strengthen Talvivaara's balance sheet to the extent that the creditors use the opportunity. If the conversion proposed in the draft restructuring programme were realised fully, it would lead to the dilution of the current holdings by 70% and create a situation in which the unsecured creditors would hold 70% of the shares and the current shareholders would hold 30%. In the draft restructuring programme, it is proposed that the capital of the restructuring debt of those creditors who decide

5 5 not to exercise their right to convert restructuring debt into shares would be cut by 99%. Mandatum is of the opinion that the proposed arrangement overall treats creditors and shareholders equally. In this case, an arrangement that leads to the dilution of the existing shareholders' holdings is warranted, as otherwise the restructuring would be carried out at the creditors' risk exclusively; that is, by reducing the capital and interest of the creditors' restructuring debt. An arrangement that is based on conversion into shares also ensures the equal treatment of all the creditors that would have equal rights to receive payment on their claims outside the restructuring proceedings. The percentage holdings that would result if the conversion were realised fully are partly based on negotiations the administrator has undertaken with the creditors of the bond and the convertible bond as well as the shareholders. In Mandatum's view, the division of ownership that would result from the conversion into shares is justified and fair. The measures included in the debt arrangements under the restructuring programme cannot be deemed to restrict the rights of creditors beyond what is necessary for the achievement of the purpose of the restructuring programme and for the fulfilment of the requirements provided in the Restructuring of Enterprises Act in respect of the relations between creditors. Mandatum has deemed that the discontinuation of the restructuring proceedings at this stage would not be justified or be in the interest of Talvivaara's creditors. Barriers to approval referred to in the Restructuring of Enterprises Act do not exist, and bankruptcy proceedings would result in a less favourable outcome for the creditors compared to the completion of the conditional restructuring programme. Quaker Funds, Inc. has addressed a statement dated 8 October 2014 to the administrator regarding the administrator's draft restructuring programme dated 30 September This statement has also been filed with the District Court. Quaker Funds, Inc. has not issued a statement on the draft restructuring programme dated 13 March Administrator's Statement Due to the Statements Submitted Revisions to the Draft Restructuring Programme The administrator has deemed that the statements of Proxis Oy, Raimo Laakia, Ellipsis European Convertible Fund and Mandatum Life Insurance Company Limited do not constitute grounds for changing the draft restructuring programme dated 13 March In addition, the administrator is of the view that the circumstances mentioned by Sinikka and Taisto Schroderus in their statement concern the activities and liabilities of Talvivaara Sotkamo Ltd, and therefore this statement does not constitute grounds for changing the draft restructuring programme. Due to the statement of Atradius Credit Insurance N.V., the administrator has rectified the draft restructuring programme to the effect that the counter-obligation is now an on-first-demand guarantee. The administrator has made the following amendments to the draft restructuring programme filed with the District Court on 13 March 2015: - The counter-obligation given by Talvivaara Mining Company Plc to Atradius Credit Insurance N.V. mentioned on pages 28 and 31 has been changed from a guarantee as for its own debt into an on-first-demand guarantee.

6 6 - A typing error has been rectified in a section concerning the pension contribution debt to Varma Mutual Pension Insurance Company, which constitutes a debt under public law. - In the draft restructuring programme of 13 March 2015, the amount of the claim was erroneously recorded as EUR 139, in deviation from the amount declared by the creditor in its notice of claim. On page 27, the amount of the claim has been rectified to correspond to the amount in the notice, i.e. EUR 129, Under accounts payable, VTT Technical Research Centre of Finland's claim has been rectified to the effect that the interest for late payment declared by the creditor on 29 November 2013, EUR 30.82, has been included in the creditor's claim in addition to the principal. The administrator has also rectified a statement according to which this claim had been paid as a small claim. The claim exceeded the maximum limit of small claims and has not been paid. - Appendix 29 concerning the groups of creditors and votes has been rectified to the effect that Varma Mutual Pension Insurance Company and the Finnish Tax Administration have been omitted from the group 'Other unsecured creditors'. Instead, they have been taken into account in the group 'Creditors under public law' with the full amount of their claims. - Appendices b and b have been updated based on the most recent information obtained by the administrator regarding the bondholders. The bondholders are still able to trade in the bonds, which has led to some bondholder changes compared to the draft restructuring programme of 13 March DECISION ON UNCLEAR DEBTS Pursuant to section 47(1) of the Restructuring of Enterprises Act and based on what has been stated in the administrator's draft restructuring programme as regards the amount of debt, the District Court orders that - Talvivaara Mining Company Plc's conditional debt to the Unemployment Insurance Fund be taken into consideration in the restructuring programme in the amount of EUR 3,923.51; and - Talvivaara Mining Company Plc's conditional debt to Atradius Credit Insurance N.V. be taken into consideration in the restructuring programme in the amount of EUR 31,940,000. According to the draft restructuring programme, the company owes a conditional restructuring debt of EUR 3, to the Unemployment Insurance Fund. Said claim is based on the estimated amount of the employer s liability component in the unemployment insurance contribution arising from the termination of an employee. The materialisation of this claim will be determined in May According to the draft restructuring programme, Atradius Credit Insurance N.V has provided the Kainuu Centre for Economic Development, Transport and the Environment an approximately EUR 31.9 million guarantee for the fulfilment of certain obligations related to Talvivaara Sotkamo Ltd's environmental and water permit. As a counter-obligation for this guarantee, Talvivaara Mining Company Plc has given Atradius a guarantee as for its own debt. Atradius has a conditional and maximum amount claim from Talvivaara Mining Company Plc in relation to the guarantee.

7 7 DIVISION OF THE CREDITORS INTO GROUPS The administrator's proposal for dividing the creditors into groups can be found in appendix 29 of the draft restructuring programme. DECISION ON DIVISION OF THE CREDITORS INTO GROUPS The District Court orders that the creditors are to be divided into groups as follows: Group I Group II Group III Group IV Creditors secured by business mortgages Creditors under public law Other unsecured creditors Debts with lowest priority The creditors will vote on the approval of the draft restructuring programme in accordance with the 'one euro, one vote' principle. No unsecured creditors will receive full payment of their claims within a month of the programme being confirmed. Restructuring debts that are unclear as to their basis or amount will be taken into consideration in the voting procedure in the amount approved by the court when discussing the draft restructuring programme. Creditors with the lowest priority do not have the right to vote. By a decision of the administrator, Talvivaara Mining Company Plc has paid small claims totalling no more than EUR 1,000. The minor creditors that have thus received full payment do not have the right to vote. VOTING PROCEDURE Due Dates of Voting Statements Creditors that are not nominee registered bondholders or holders of the convertible bond must state whether they accept or reject the draft to the Espoo District Court no later than 6 May 2015 (voting statement). A voting statement submitted after the due date shall not be taken into consideration. Nominee registered bondholders and holders of the convertible bond must cast their votes by 16:00 on 4 May A voting statement submitted after the time limit shall not be taken into consideration. The voting procedure will be completed through the following alternative methods: (a) Ordinary vote: the voting ticket must be submitted to the District Court of Espoo. This voting method concerns - creditors of accounts payable; - creditors under public law; - creditors of financing debts; - creditors of conditional debts; and - bondholders with a Finnish book-entry account. For the voting statement of a bondholder to be taken into account, the bond holdings must be recorded on the bondholder's book-entry account on the record date, 24 April 2015.

8 8 (b) Nominee registered bondholders (FI ): vote by the intermediary of Euroclear Finland Oy's system. The bondholders with voting rights will be determined based on the status of the record date, 24 April Votes must be cast by 16:00 on 4 May In order to vote on the draft restructuring programme, nominee registered bondholders must register in the temporary list of holders maintained by Euroclear Finland Oy. To ensure that Euroclear Finland Oy has sufficient time to prepare a report of the votes cast and of the bondholders registered on the record date of 24 April 2015 and to file the report with the District Court before the end of the voting procedure by 6 May 2015, Euroclear Finland Oy must receive all voting statements of the bondholders by 16:00 on 4 May (c) Holders of the convertible bond (ISIN: XS , Common Code: ): vote by the intermediary of the holder's clearing system. Votes must be cast by 16:00 on 4 May To be able to vote on the draft restructuring programme, holders of the convertible bond must prove their position as creditors of Talvivaara Mining Company Plc. To this end, they must block their creditor position in accordance with the practices of the international bond market. The blocking must have been effected by the time the bondholder wishes to vote on the draft restructuring programme. The blocking must remain valid until the morning of the day following the ending of the voting procedure, i.e. until 11:00 on 7 May The voting statements submitted by the intermediary of clearing systems will be compiled by a tabulation agent. To ensure that the tabulation agent has sufficient time to prepare a report of the votes cast and to file the report with the District Court before the end of the voting procedure by 6 May 2015, the tabulation agent must receive all voting statements of the holders of the convertible bond by 16:00 on 4 May Creditors with Claims in More Than One Group Creditors with claims in more than one of the groups (a) (c) must vote separately in each group for each claim. Voting Report Notices After having received the voting statements from the District Court, the administrator must prepare a voting report and file it with the District Court by 25 May The administrator must serve this notice on the creditors and on the debtor without delay. APPEAL This decision is not open to appeal. Court Order on the Approval of the Restructuring Programme The District Court will give an order on the approval or non-approval of the draft restructuring programme once it is known whether the requirements set out in the draft restructuring programme have been met. The time of giving the order will be announced separately. District Judge [signature] Tiina Veranen