MILBANK ACTS ON SUCCESSFUL TENDER OFFER AND SECURITIES ISSUANCES FOR ICTSI

Milbank Acts as sole international counsel on mulitfaceted liability management and securities transactions for one of the world’s largest port operators

International law firm Milbank, Tweed, Hadley &McCloy has recently advised on the successful tender offer for existing perpetual capital securities and concurrent new issuance of senior perpetual capital securities of International Container Terminal Services, Inc. (ICTSI), one of the largest port operators in the world, with a total of 29 common user container terminals located in 21 countries globally and having total annual throughputs ranging from 50,000 to 2,500,000 twenty-foot equivalent units.

Milbank advised Citigroup and HSBC as dealer managers on the invitation by Royal Capital B.V. (Royal Capital), a subsidiary of ICTSI, to holders (the Securityholders) of Royal Capital’s US$350 million 8.375% Guaranteed Subordinated Perpetual Capital Securities (the Securities) guaranteed by ICTSI, to tender any or all of their Securities for cash (the Tender Offer). The Tender Offer, which commenced on January 12, 2015 and expired on January 21, 2015, was conditional upon the pricing of a new issue of US dollar Senior Guaranteed Perpetual Capital Securities of Royal Capital also guaranteed by ICTSI (the New Securities).

The Tender Offer was well received by ICTSI’s investor base, primarily comprising fund managers and banks, with Securityholders holding an aggregate principal amount of US$229,841,000 tendering their Securities at a tender price of US$1,076.25 per U.S.$1,000.

The New Securities priced on January 22, 2015 with an issue size of US$300 million, fulfilling the financing condition. Citigroup, HSBC and Deutsche Bank were the managers for the New Securities. The New Securities confer a right to receive distributions at a rate of 6.250% per annum and were priced at 99.551% to yield 6.375% per annum. The New Securities shall rank paripassu with all other outstanding unsubordinated obligations of Royal Capital, who will have the right to redeem the New Securities on May 5, 2019, May 5, 2024, and any semi-annual distribution payment date thereafter. The rate of distribution for the New Securities will be reset every five years and will increase by 2.50% on May 5, 2024, in each case if the New Securities were not already redeemed by Royal Capital. Consistent with the requirements for equity under IFRS, Royal Capital may resolve, at its discretion, to defer payment of distribution otherwise payable on a distribution payment date.

In addition, Securityholders that wished to subscribe to New Securities in addition to tendering Securities for purchase pursuant to the Tender Offer received priority in allocation of the New Securities.

The Tender Offer and issuance of the New Securities were significant in several respects. The Tender Offer was the first such transaction targeting repurchase of US dollar perpetual securities in Asia while the New Securities represent the first offering of US dollar senior perpetual securities by a Philippine issuer. This transaction also comprised the first Asian corporate liability management exercise and the first senior corporate hybrid capital trade globally in 2015.

Alongside the Tender Offer and the issuance of New Securities, Milbank also served as international counsel to Citigroup, HSBC, UBS, Credit Suisse, Standard Chartered, ANZ and Deutsche Bank as dealers in the update of ICTSI Treasury B.V.’s (ICTSI Treasury) US$1 billion medium term note programme guaranteed by ICTSI. The programme update was completed on January 21, 2015. ICTSI Treasury (another subsidiary of ICTSI) subsequently drew down approximately US$117.5 milion of its existing 5.875% Guaranteed Notes due 2025, a portion of which was issued for approximately U.S.$91,839,000 in aggregate principal amount of ICTSI’s 7.375% Senior Notes due 2020 held by certain domestic investors and privately placed for exchange.

Global securities partner James Grandolfo commented, “We are delighted to act on yet another set of successful liability management transactions and issuances for ICTSI. This transaction clearly demonstrates ICTSI’s committed practice of prudent liability and capital management to better match its long-term port concessions, which have maturities up to 2055. We are pleased that Milbank has had the opportunity to advise on one of the first major international capital markets transactions for a Philippine corporate in 2015.”

The Milbank team for the transaction was led by partner James Grandolfo and counselPaul Pery, with support from associates Adam Heyd and York Wu.